Millions of people in the United Kingdom will be protected through strengthening regulation of interest-free buy-now pay-later credit (BNPL) agreements, under plans announced by the UK government on Monday. Lenders will be required to ensure loans are affordable and rules will be amended to ensure advertisements are fair, clear, and not misleading.
The government will expand rules to cover other forms of unsecured short-term credit that pose similar risks to consumers, such as those used for dentistry work. People do not currently have the usual full range of borrower protections when taking out this type of loan and they are rapidly increasing in popularity, resulting in a potential risk of harm to consumers. Lenders offering the product will need to be approved by the Financial Conduct Authority (FCA), and borrowers will also be able to take a complaint to the Financial Ombudsman Service (FOS).
Economic Secretary to the Treasury, John Glen said: “We need to ensure that people can embrace new products and services with the appropriate protections in place. By holding BNPL to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK.”