By Elizabeth Piper and Huw Jones
LONDON (Reuters) – The UK plans to require lenders working on a buy-now-pay-later (PNBL) model to check customers’ ability to pay, seek approval from the Financial Conduct Authority (FCA) and confirm advertisements. The government said on Monday that their offers were fair and clear.
Unregulated BNPL companies offer interest-free short-term loans to pay the cost of products in installments and, according to the government, are growing in popularity.
The British government said it would publish a consultation on legislation for the sector by the end of the year, then finalize the text with specific rules by mid-2023.
Martin Lewis, founder of consumer campaign group MoneySavingExpert.com, said progress to ensure proper verification was “painfully slow”.
“Buy now, pay later is often deceptively marketed as an easy payment option. It’s not. It’s a loan,” Lewis said.
In February, the FCA asked operators BNPL Clearpay, Klarna, Laybuy and Openpay to amend their contracts after identifying potential harm to customers. The body had to apply the UK Consumer Rights Act.
BNPL companies charge online retailers for each transaction.
Laybuy co-founder Gary Rohloff said the company always wanted proportionate rules that reflected the low risk of the game and supported the government’s approach.
Britain said last week it would update its decades-old consumer credit law to simplify rules and cut costs, with a public consultation due later in the year.
(By Elizabeth Piper and Huw Jones)