Treasury has published its consultation response to its plans for regulating the buy-now-pay-later credit market. It has confirmed that:
- lenders offering BNPL will need to be authorised by FCA;
- lenders will need to carry out affordability checks;
- BNPL adverts will be covered by the financial promotion regime; and
- borrowers under BNPL contracts will be able to complain to FOS.
Treasury has also confirmed the new regime will apply to other forms of short-term interest-free credit that pose similar risks, so that, for instance, businesses who partner with a third party lender to offer credit for large domestic purchases will fall within the regulatory perimeter. However there will be exemptions where there is limited risk of consumer detriment and where regulation would otherwise adversely impact day to day business activities. Invoicing (deferred payment), interest free agreements to finance insurance, charge cards, trade credit, and employer/employee lending will all fall outside scope. It will also exempt from the need to become authorised as a credit broker merchants who broke third-party loans when they do not receive commission for doing so – and in fact pay the lender to provide the credit. Domestic premises suppliers of these products will be treated the same as domestic premises suppliers of credit that is currently regulated. The Government is still considering whether to extend the perimeter to online retailers who offer credit on their own products.
CCA requirements will be tailors to apply appropriately to the newly in-scope products.
Timing-wise, the Government plans to consult on draft legislation by the end of the year.