The UK is set for significant regulatory changes in the Buy Now, Pay Later (BNPL) sector, driven by growing concerns over consumer risks, particularly for vulnerable individuals. A recent consultation published by HM Treasury outlines proposals to bring third-party BNPL lenders under the regulatory oversight of the Financial Conduct Authority (FCA). This shift aims to ensure that all BNPL agreements, regardless of the amount, adhere to strict regulatory standards, eliminating any exemptions for smaller loans. The FCA is expected to develop a new information disclosure regime tailored specifically for BNPL products, moving away from the existing Consumer Credit Act framework. This regulatory overhaul is anticipated to be implemented in stages, with a temporary permissions regime allowing existing lenders to operate while they seek full authorization. Although the changes will impose significant compliance costs on lenders, they aim to enhance consumer protections and potentially improve outcomes for users of BNPL services.
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