Buy-now, pay-later (BNPL) products have seen increasing use among many UK consumers, helping some to manage unexpected costs. In the six months to January 2023, the Financial Conduct Authority’s (FCA) financial lives survey reported that 14 million consumers used BNPL products.
When provided in a responsible manner, BNPL can provide a useful and affordable source of credit. However, as identified by the 2021 Woolard review, it also has risks. For example, BNPL firms are not required to comply with the provisions of the Consumer Credit Act 1974, and BNPL firms solely offering these types of agreements do not need to adhere to the FCA rules that apply to other consumer credit products. The Government are therefore concerned that consumers using BNPL do not have access to key protections.
On 17 October, the Government published a consultation setting out their plans to fix this by bringing the sector into regulation. The consultation will be open for six weeks until 29 November.
The Government’s approach has been informed by five key principles:
Consumers must have access to simple, clear, understandable and accessible information;
consumers should have protection when things go wrong;
consumers should only be lent to if it is affordable;
regulation should be proportionate so that consumers have continued access and choice; and
regulation must be introduced urgently to ensure consumers are protected and the sector has certainty. Once implemented, the Government’s proposals will deliver on these principles.
Under the proposals, BNPL firms will need to be authorised by the Financial Conduct Authority and will be subject to ongoing supervision. The FCA will be able to set appropriate rules on assessing affordability and creditworthiness, reducing the risk that borrowing is unaffordable. They will also be to set rules on how firms should resolve complaints, including allowing consumers to take complaints to the independent Financial Ombudsman Service.
Consumers will have access to key legal rights, such as section 75, which will make it quicker and easier for consumers to get refunds.
The Government are also proposing to disapply certain information requirements in the Consumer Credit Act 1974 that, if applied to BNPL, could lead to poor consumer outcomes. Instead, the FCA will be able to utilise their powers to apply more appropriate disclosure requirements in its rulebook. This will ensure that consumers can actively engage with the information that firms provide, allowing them to make informed decisions before entering into a BNPL agreement, throughout the duration of the agreement, and especially when they encounter financial difficulty.
Given the need to act urgently—and because HM Treasury has already undertaken previous consultations on this topic—this consultation will be shortened to six weeks. After reviewing feedback, the Government will bring forward legislation as soon as possible. The new regime will come into force 12 months after the legislation is made, once the FCA has finalised its detailed rules. The consultation is available on
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