New Protections Confirmed for Buy Now Pay Later Borrowers

BNPL will be subject to the Consumer Duty and consumers will benefit from:

• Clear information: Consumers will get clear, upfront details about their agreement, including when payments will be due, amounts, and what happens if they miss a payment.
• Affordability checks: Lenders must carry out proportionate checks to make sure customers can afford to repay what they borrow before offering BNPL.
• Support when needed: Lenders will need to offer support to customers in financial difficulty, and, where appropriate, direct them to free debt advice.
• Complaints and compensation: If something goes wrong, consumers will be able to complain to the Financial Ombudsman Service.

BNPL provides an important source of credit for many, but there are no protections in place currently for those who use it repeatedly and may not be able to afford it. The aim of the new regulation is to help consumers navigate their financial lives, with appropriate support for consumers.

Sarah Pritchard, deputy chief executive at the FCA, said:  ‘We want the Buy Now Pay Later sector to thrive – it provides an important source of credit to many – and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they’re unable to repay, because that could worsen their financial situation. Now Parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.’

Lenders will need to be authorised by the FCA to provide BNPL. The FCA will provide pre-application support to these firms to help them get ready.