New regulations for buy now pay later (BNPL) services will be implemented in early 2025, aiming to enhance consumer protection.
- The proposed rules will include affordability checks and additional consumer safeguards to prevent excessive debt accumulation.
- A consultation will be held, closing on 29 November, to gather input from BNPL firms and regulators on effective implementation strategies.
- Critics have noted previous delays under the Conservative government concerning BNPL regulation, highlighting a need for urgent action.
- Consumer advocacy groups stress the importance of clear information and debt management options for BNPL users.
The United Kingdom government is set to introduce stringent regulations for buy now pay later (BNPL) services by early 2025, focusing on boosting consumer protections. This legislative move aims to incorporate affordability checks and shielding measures to help at-risk consumers manage potential financial pitfalls associated with BNPL usage.
Economic Secretary to the Treasury, Tulip Siddiq, announced that a consultation period would bring together BNPL companies and regulatory bodies to fine-tune the proposed rules. This consultation will remain open until 29 November, with the ultimate legislation anticipated to pass through parliament in early 2025, and implementation set for 2026. Siddiq remarked, ‘Millions of people use buy now pay later to manage their finances, but the previous government’s dither and delay left them unprotected.’
The previous attempt by the Conservative government to regulate BNPL services framed these services as credit products. However, the effort stalled due to fears that it might lead to a retreat by BNPL providers, a concern dismissed by FCA head Nikhil Rathi as unfounded. Siddiq has also been a vocal critic of these delays and has pointed out the escalating risk of debt for consumers without regulatory oversight.
At the Labour Party Conference, Siddiq indicated that regulation of BNPL would occur ‘soon’ in response to mounting consumer debt concerns. Rocio Concha, representing consumer advocacy group Which?, has emphasised the urgency of these legislative measures. She cited research revealing that many BNPL users are unaware of the debt risks, leading to uncapped fees and inadequate consideration for missed payments.
The forthcoming legislation aims to align BNPL protections with those offered to other credit consumers, providing a structured environment for the sector’s evolution. This development is seen as essential to prevent the unchecked accumulation of consumer debt and ensure a balanced growth trajectory for the BNPL sector.
The upcoming BNPL regulations signify a critical step towards equitable consumer protection and sectoral stability.
