Britain sets out legislation to regulate buy-now-pay-later credit

Openpay

14/02/2023 07:39

(Repeats story published late Tuesday, no changes to text.)
    By Huw Jones
       LONDON, Feb 13 (Reuters) - Britain on Tuesday will set
out draft legislation to regulate "buy now pay later" credit,
saying the sector posed potential harm to consumers without
thorough affordability checks.
    BNPL companies are largely unregulated and typically offer
on-the-spot interest-free short-term loans that spread payments
for retail goods like clothing.
    The sector nearly quadrupled during the pandemic in 2020 to
2.7 billion pounds ($3.28 billion).
    With Britain facing a cost of living crisis, consumer groups
worry cash-strapped people are getting into debt by using BNPL
to buy food or pay energy bills.
    The finance ministry said it will launch a public
consultation on Tuesday on legislation to regulate BNPL, giving
the Financial Conduct Authority (FCA) powers to authorise
operators and their activities.
    The move had already been flagged for late 2022.
    "People should be able to access affordable credit, but with
clear protections in place," financial services minister Andrew
Griffith said in a statement from the finance ministry.
    BNPL agreements currently rely on minimal credit checks,
with lenders not required to give key information to borrowers,
and some people may end up borrowing more than they can afford
to repay, the ministry said.
    The ministry said consumers will be given the new right to
take complaints to the Financial Ombudsman Service.
    Last February, the FCA told BNPL operators Clearpay, Klarna,
Laybuy and Openpay to change their contracts after identifying
potential harm to customers. It had to use consumer rights law
pending the new legislation the ministry was announcing on
Monday.
    Once the FCA has been given its new powers, it will consult
on detailed rules for the sector, such as mandatory
affordability checks, licensing of operators, and fair
marketing.
    Jane Goodland, trustee of the Centre For Financial
Capability, a financial education charity, said people of all
ages were turning to BNPL as they struggled to meet payments due
to rising inflation, showing the need for urgent regulation.
($1 = 0.8243 pounds)
 (Reporting by Huw Jones. Editing by Jane Merriman)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))