UK government lays out plans for BNPL legislation
The UK government has invited feedback on its buy now, pay later (BNPL) draft legislation that will bring BNPL into Financial Conduct Authority (FCA) regulation.
The consultation on the draft legislation, which is now open for eight weeks until early April, follows a consultation on policy options in October 2021 and a response published in June 2022.
The government says its draft legislation aims to bring BNPL into the regulatory sphere “in a proportionate way”.
It says the scope of regulation should be limited to agreements that are offered by third-party lenders, citing evidence from stakeholders that it would be “disproportionate” for regulation to apply to all agreements provided by merchants online or at a distance, “as it would potentially capture the types of arrangement where there is little, if any, evidence of there being a substantive risk of consumer detriment”.
Currently, BNPL agreements are unregulated and firms offering them do not need to be authorised by the FCA or comply with Consumer Credit Act requirements.
Other types of interest-free lending, including what the government has previously referred to as short-term interest-free credit (STIFC), as well as day-today business activities such as invoicing, are also exempt.
After feedback, the UK government said the scope of regulation would capture BNPL as well as STIFC agreements where they are provided by a third-party lender.
Views are now being sought on whether the draft legislation effectively delivers the policy positions set out in the government’s June 2022 consultation response, which outlined how lenders would be required to carry out affordability checks to ensure loans are affordable to customers and rules would be amended to make sure advertisements are “fair, clear and not misleading”.