Treasury is set to introduce consumer protection rules for BNPL in 2025.
- New regulations aim to safeguard consumers from accruing harmful debt.
- Affordability checks and consumer protections are part of the planned measures.
- The consultation process will involve BNPL firms and regulators until November.
- The initiative addresses previous criticisms of government inaction on BNPL.
In a move to enhance consumer safety and fiscal responsibility, the Treasury has announced the implementation of new rules governing Buy Now Pay Later (BNPL) agreements, expected to be in place by early 2025. These regulations are designed to shield consumers from potential financial pitfalls associated with BNPL services, such as excessive debt accumulation. Economic Secretary to the Treasury, Tulip Siddiq, outlined plans for a consultation involving both BNPL companies and regulatory bodies, aiming to effectively integrate these measures.
Scheduled to conclude on 29 November, the consultation seeks to finalise the details of the regulatory framework, which is anticipated to be presented to Parliament in early 2025, with enforcement expected by 2026. Siddiq highlighted the importance of these protections, indicating that they will align BNPL with other credit forms, ensuring that consumers receive similar safeguards.
This legislative endeavour aims to rectify the shortcomings of the previous government, which Siddiq criticised for delays that left consumers vulnerable. The earlier draft legislation had stalled due to concerns over potential loss of BNPL providers—a fear dismissed by Financial Conduct Authority’s chief, Nikhil Rathi, as unfounded.
The Labour Party, and Siddiq in particular, have consistently pressed for regulation in response to the increasing risk of consumer debt linked to unregulated BNPL usage. Calls for action were underscored by findings from consumer advocacy group Which?, pointing to widespread consumer unawareness of the debt nature of BNPL services and the potential financial consequences of missed payments.
Consumer advocate Rocio Concha from Which? supports the rapid passage of the legislation, arguing for parity in consumer protections between BNPL users and traditional credit product consumers. The legislation’s success hinges on the introduction of clear risk information, affordability checks, and redress options, which are deemed crucial for protecting consumer interests.
The Treasury’s proposed legislation aims to rectify previous inefficiencies, providing consumers with crucial protections against BNPL-related financial risks.
