The new Government confirms that regulation of the Buy Now, Pay Later (BNPL) sector will go ahead.
However, the timeline for the new rules to protect consumers from unaffordable or unsuitable borrowing remains unclear.
Responding to a written Parliamentary question last week, economic secretary to HM Treasury, Tulip Siddiq MP, said “regulating Buy Now, Pay Later products is crucial to protect people and deliver certainty”.
She added that the Government would “work closely with all interested stakeholders” and would set out its plans “shortly”.
Before the general election earlier this month, Labour party leader Sir Keir Starmer reiterated his commitment to regulating BNPL in his response to MoneySavingExpert’s (MSE) ‘Leaders’ Debate’, adding that the lack of consumer protections in the market “has left millions at risk from bad actors”.
MSE founder Martin Lewis has long called for urgent regulation of the BNPL sector in order to protect consumers from building up unmanageable debt.
Plans to bring the sector under regulation were first tabled by the Conservatives in 2021, with regulation intended to start at the end of 2023. But the plans were repeatedly pushed back following lobbying from the BNPL sector.
The delays prompted repeated calls for action from Lewis as well as charity Citizens Advice and campaign group Which?
Ex-chancellor Jeremy Hunt told MSE that regulation would go ahead, though no progress was made by the time of the general election on 4 July.
When BNPL regulation comes into effect firms such as Clearpay and Klarna will need to run affordability checks before signing up customers.
Borrowers with complaints will also be able to take their cases to the Financial Ombudsman Service, as well as benefiting from Consumer Credit Act Section 75 rights for purchases between £100 and £30,000, as they do for credit cards now.
Related: YourMoney.com’s guide on everything you need to know about Buy Now, Pay Later.
