Crackdown on buy-now-pay-later market
The government has introduced new rules for the buy-now-pay-later sector, amid rising concerns of financial harm to vulnerable consumers.
The credit facility – which enables people to pay for products such as clothes and food deliveries in instalments, sometimes with few or no credit checks – is set to be regulated by the Financial Conduct Authority (FCA).
Providers will now have to give consumers key information about their loans and issue credit that is genuinely affordable.
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Consumers will have the new right to take complaints to the Financial Ombudsman Service.
The Treasury said the clampdown will help protect around 10 million customers from unconstrained borrowing while still ensuring those who need it have access to interest-free credit.
Many buy-now-pay-later lenders are currently unregulated and rely on minimal credit checks, the Treasury said. As such, these lenders are not required to give key information to borrowers, and some people may end up borrowing more than they can affordably repay.
“People should be able to access affordable credit, but with clear protections in place,” said City minister Andrew Griffith.
“That is why these proposed regulations are so important.
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“Today’s summit will also help regulators and banks better understand the best ways to support people who feel boxed in by debt and open up the financial system to people who find it more difficult to access.”
A summit of banks and debt charities will also be convened today by Griffith, who will urge the group to work together to improve financial education and inclusion.
Lloyds and Barclays banks, trade body UK Finance and the FCA will be among those attending the Financial Inclusion Policy Forum at the Money Advice Trust in Birmingham.
Several former peer-to-peer lenders have signalled an interest in the buy-now-pay-later market.
Funding Circle launched a beta trial of its product – FlexiPay – in August 2021, letting companies spread any UK invoice or supplier payment over three months, with the initial payment made upfront on their behalf. By May 2022, the business lender said the product had exceeded its expectations.
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