Taxpayers claiming rebates via third parties will have stronger protections under a shake-up to the way repayment agents can operate (Dominic Lipinski/PA)
(Picture: PA Wire)Buy now, pay later businesses face a clampdown under new draft regulations published by the government today.
Under new rules set out in a Treasury consultation paper today, providers will have to give consumers key information about their loans and issue credit that is genuinely affordable as part of a bid to to protect at least ten million consumers from the risk of exposure to financial harm.
Buy-Now Pay-Later credit products are set to be regulated by the Financial Conduct Authority, with consumers being given the new right to take complaints to the Financial Ombudsman Service.
Use of BNPL products has soared in recent months as more and more Brits turn to the interest-free payment method to stretch their budgets through the cost-of-living-crisis. Nearly £1 in every £8 spent online last month used buy-now-pay-later services, according to research by Adobe Analytics.
Economic Secretary to the Treasury, Andrew Griffith said: “People should be able to access affordable credit, but with clear protections in place.
“That is why these proposed regulations are so important.”
Some BNPL firms have have already stepped up the credit information they collect on consumers in anticipation of the imminent regulations.
London-based Zilch, which was valued at $2 billion in a funding round last year, is set to begin sharing customer data with credit references agencies, according to the Telegraph, as part of a change in policy which could determine their eligibility for credit issued by other lenders.
Zilch partnered with credit agency Experian last year – a move which allowed it to carry out credit checks on customers without impacting their credit score.
Philip Belamant, CEO and co-founder of BNPL business Zilch, said: “Today marks a positive day - in the context of the cost-of-living crisis, it’s never been more vital for people to have access to interest-free credit, via responsible organisations that carry out appropriate affordability checks and enable others to do the same through reporting via the major UK Credit Reference Agencies.
“We hope that today’s announcement will spur the acceleration for proportionate regulation in both the BNPL and wider credit lending ecosystem, creating a responsible and sustainable environment for customers.”
