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Regulation
Realistic regulation ?
Regulating BNPL : What it means for merchants By Samantha Fogerty
As it stands , the Buy Now , Pay Later ( BNPL ) market is almost completely unregulated . We have recently seen the UK Government postpone regulation plans following pressure from providers to water down its proposals . But draft laws published in February 2023 , designed to protect consumers from rising debt attributed to the market , indicate a change . Many industry leaders have threatened to leave the UK , worrying that regulation will be costly and could even become impossible to manage . And it ’ s not just lenders that could be impacted , the proposed regulations may well put pressure on merchants too , with both left shouldering the financial implication .
An unregulated market
Research shows that as of January 2024 , half of UK adults have used BNPL and it ’ s likely to account for ten percent of ecommerce sales by the end of this year . BNPL has helped support retailers through the current cost of living crisis , but the lack of regulation is becoming difficult to ignore . BNPL loans have presented to some almost like free money , with no enforced FCA regulation meaning they don ’ t show up on credit files . This has enabled an extremely lax approval process , allowing consumers to slip under the radar , taking out multiple loans whilst defaulting on payments to others .
This availability of easy credit without accountability has caused many consumers to end up in significant financial troubles , grappling with the burden of increasing debt . This is not to say we need to over-regulate , but there is a clear case for lending transparency to protect consumers .
Proposed regulation
The draft laws set out tighter advertising standards to ensure lenders aren ’ t misleading consumers . They will also allow consumers to make complaints to the Financial Ombudsman Service ( FOS ), instead of just directly to the lender . Additionally , customers will get powerful Section 75 protection on any purchases made through BNPL . Finally , the FCA will have the responsibility to make sure BNPL firms are following the rules .
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