Britain makes laws that will control “buy now-pay-later credit.
Reuters reports from London.Britain will release a draught bill to regulate “buy now, pay later” credit on Tuesday. The country says that the industry could hurt consumers if there aren’t thorough checks on their ability to pay.
BNPL companies aren’t regulated very much, and they usually offer short-term loans with no interest on the spot to help spread out payments for things like clothes.
During the pandemic in 2020, the industry nearly quadrupled to 2.7 billion pounds ($3.28 billion).
With the cost of living in Britain going up, consumer groups are worried that people who don’t have enough money are going into debt by using BNPL to buy food or pay their energy bills.
The finance ministry said that it will start a public consultation on legislation to regulate BNPL on Tuesday. This would give the Financial Conduct Authority (FCA) the power to give operators permission to do their jobs.
The move had been planned for the end of 2022.
In a statement from the finance ministry, financial services minister Andrew Griffith said, “People should be able to get affordable credit, but there should also be clear protections in place.”
At the moment, BNPL agreements are based on minimal credit checks, and lenders are not required to give important information to borrowers. This means that some people may end up borrowing more than they can afford to pay back, according to the ministry.
The ministry said that people will now have the right to go to the Financial Ombudsman Service with complaints.
In February of last year, the FCA told BNPL companies Clearpay, Klarna, Laybuy, and Openpay to change their contracts because customers could be hurt. It had to use the consumer rights law until Monday, when the ministry was going to announce the new laws.
Once the FCA has its new powers, it will work with the sector to come up with detailed rules, such as mandatory affordability checks, licences for operators, and fair marketing.
Jane Goodland, a trustee at the Center for Financial Capability, a charity that teaches people about money, said that people of all ages were turning to BNPL because they were having trouble making payments because inflation was going up. This showed that regulations were needed right away.
($1 is worth 0.8244 pounds).