Buy now, pay companies later to get regulated – and all buyers will face affordability checks


Buying now, paying later is a simple concept: instead of paying at the cash desk or online, BNPL pays the merchant for you. You then agree to reimburse BNPL over a few weeks or months, which allows you to spread your purchase costs. It’s interest-free and fee-free, but you miss a refund and risk being charged late fees, which in turn can negatively impact your credit score.

Affordability checks will be required

The use of BNPL products has almost quadrupled in 2020, with five million people using them since the start of the coronavirus pandemic, according to the FCA. While the average deal tends to be relatively small, buyers can make multiple deals with different companies – and the Woolard review found that it would be relatively easy to rack up around £ 1,000 in debt than referral agencies. credit and traditional lenders cannot see. The review also found that more than one in 10 customers of a large bank using BNPL were already in arrears.

The Woolard Review recommends bringing interest-free, buy now, pay later under FCA oversight – and that’s something the Treasury said today it intends to do. Under the new rules proposed by the government, lenders will be required to perform affordability checks on all customers and to ensure that they are “treated fairly” – especially those who are vulnerable or have difficulties. difficulties in repaying.

Current affordability rules do not require businesses to perform so-called “soft” or “hard” credit checks before granting credit, although many lenders do in practice. The FCA says it’s currently up to lenders to judge what information they need to be confident a loan is affordable, and it’s also up to lenders to pass loan information to credit reference agencies.

You can also file a complaint with the Mediator

Once the government’s proposals announced today are implemented, customers who have problems with a Buy It Now, Pay Later service will be able to escalate their complaint to the free and independent Financial Ombudsman Service. This is something they cannot do right now.

The changes will not take force just yet however

Although the government today announced its intention to regulate buy now, pay businesses later, we do not yet have a clear timeline for when that will happen. The next step is for the government to launch a consultation on how it should implement the regulations and ensure that its approach is “proportionate”. Once this consultation is over, the government indicates that it plans to introduce new laws “as soon as parliamentary time permits”.


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