UK government lays out plans for BNPL legislation #
The UK government seeks feedback on BNPL draft legislation consultation which is now open until early April. The feedback will bring BNPL into Financial Conduct Authority (FCA) regulation.
The government stated that the legislation of a draft aims to bring BNPL into regulation “in a proportionate way”.
The UK government states that the scope of regulations should be limited by third-party lenders agreements as the stakeholders provide evidence to support the hypothesis that it would be “disproportionate” for regulation to apply to agreements provided by merchants online or on distance. Such policy has a possible chance “to potentially capture the types of arrangement where there is little, if any, evidence of there being a substantive risk of consumer detriment.”
As of now, BNPL agreements aren’t regulated by the FCA, so the firms providing those services and agreements aren’t necessarily complying with the Consumer Credit Act requirements or authorised by the FCA.
The scope of regulation would capture BNPL and short-term interest-free credit (STIFC) where they are issued by a third-party lender after the views are sought. The feedback mostly aimed at the effective delivery of the policy position stated in the government’s June 2022 consultation response, which set out the principles of lenders’ conduction of affordability checks to ensure loans are affordable to customers and rules would be revised to ensure that advertisements are “fair, clear and not misleading”.