The UK government is moving towards regulating the Buy Now, Pay Later (BNPL) sector, as announced in the consultation published by HM Treasury on October 17, 2024. BNPL allows consumers to make interest-free repayments over a period of up to 12 months, primarily for online shopping. However, the lack of regulation has raised concerns about consumer risks, including high levels of indebtedness and the absence of affordability assessments. The consultation proposes the introduction of a new category of regulated credit agreement, specifically the Regulated Deferred Payment Credit Agreement, which will cover BNPL agreements offered by third-party lenders. This will limit the existing exemption to agreements provided directly by merchants. Additional measures include requirements for financial promotions and a Temporary Permissions Regime for unauthorised firms to operate while awaiting full authorisation. The consultation will close on November 29, 2024, with the FCA expected to take over regulation within a year after the legislation is finalized.
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