The UK government is taking significant steps to regulate Buy Now Pay Later (BNPL) services, with HM Treasury publishing a consultation on Draft Legislation aimed at enhancing consumer protection and ensuring better outcomes in this previously unregulated market. The consultation outlines the scope of the new regulations, which will include Deferred Payment Credit (DPC) agreements offered by third-party lenders while maintaining exemptions for certain types of agreements. Notably, the proposed changes aim to simplify compliance by disapplying some provisions of the Consumer Credit Act (CCA), thereby fostering innovation and reducing regulatory friction. The introduction of a Temporary Permissions Regime (TPR) will allow for a smooth transition into the new regulatory framework without disrupting existing lending practices. Key regulatory controls will include mandatory creditworthiness assessments and enhanced credit reporting, which are expected to improve transparency and accountability in the BNPL sector. The consultation will remain open until November 29, 2024, and will inform the Financial Conduct Authority's (FCA) future rules on BNPL.
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