Buy Now, Pay Later (BNPL) allows buyers to delay payment for products such as clothing and furniture. This form of credit experienced explosive growth during the pandemic, especially in people under the age of 30 and in people with tight finances. However, there is growing concern among regulators, policies and consumer groups about how easy it is for people to buy more than they can afford and potentially incur large debts. This month, the charity Citizens Advice said buyers were “accumulating borrowing over borrowing and sinking into increasingly desperate situations.” In February 2021, the government announced that the Financial Conduct Authority would take over the policing of the multi-billion pound sector, which is dominated by companies such as Klarna, Clearpay and Laybuy in the United Kingdom. This will give consumers more protection and more rights – for example, all companies will need to conduct proper affordability checks before lending and ensure that customers are treated fairly if they have difficulty repaying. The government provided information on the planned new rules on Monday, but some commentators expressed frustration with the seemingly long timetable for reforms. The finance ministry said the government would publish a consultation on the bill “by the end of this year” and would seek to submit secondary legislation to parliament by mid-2023. After that, the FCA will have to consult its industry rules, leading a confidential industry to say: “We are probably not going to see anything in the legislation until 2024.” It is believed that the government accepts that the principles of 2024 may be more realistic than 2023. The finance ministry said the timetable for the reforms was due to the “complexity” of the regulations. Ministers also intend to extend the rules to cover other forms of short-term unsecured credit, such as those used to pay for dental work. Responding to the announcement, Martin Lewis, founder of MoneySavingExpert.com, said: “Progress is painfully slow. Buy now, pay later, the arrangement is desperate, so my pleasure that it will finally happen is mitigated by the frustration for the time it lasts “. He said it had been almost two years since his body sounded the alarm about BNPL’s rapid growth and called for urgent regulation. “However, these protections will not yet exist for the financially gloomy winter to come.” Subscribe to the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk Gary Rohloff, co-founder and CEO of BNPL Laybuy, said he supported the government’s approach and would work closely with the FCA in the next steps. “We have always been in favor of a proportional regulation model that reflects the low BNPL risk, supports small e-commerce businesses and sets high standards across the industry,” he said.
