UK Finance response to the HM Treasury consultation – Regulation of Buy-Now Pay-Later

In February 2021 the government announced their intentions to regulate Buy Now Pay Later (BNPL) credit, and UK Finance responded to their initial consultation on policy options to deliver a proportionate approach to regulation.

The latest consultation looks at how the draft legislation should be applied.

All of our members continue to support the regulation of BNPL lending, to enable consumers to receive protection as they do through other regulated consumer credit products, such as credit cards and overdrafts. It is not clear why credit provided by a retailer would not fall within regulation if the same harms of credit provided by financial services firms are relevant. We are therefore calling on HMT to explore the options to bring the most concerning merchant-based used cases into regulation. These options should have a forward-looking view, noting that the harms identified within BNPL have taken time to be brought within legislation to provide the required consumer protections.

The key legislation for all forms of consumer lending is the Consumer Credit Act (CCA). We have continued to advocate that the remaining provisions of the CCA are in need of urgent reform and welcomed the HM Treasury commitment on this in 2022. Whilst HMT are currently consulting on CCA reform, this is highly complex area of legislation, and it is expected that there will be a number of years before the full review is completed.

A key area of consumer protection is that customers understand the product by being provided with pre contractual information requirements. All members agree that the prescribed CCA information does not work well for customers and needs reform. There is however a divergent view across members as to whether earlier reform of these requirements should be available to BNPL products pending the broader CCA reform or whether reform should be undertaken at the same time to apply equally to all products to ensure a regulatory level playing field across different types of credit providers. 

Our full consultation response is appended below.