The UK government has announced a major overhaul of 'Buy Now, Pay Later' (BNPL) credit schemes, introducing tighter regulations to protect consumers from falling into debt traps. The move comes amid growing concerns about the lack of transparency and affordability checks in the rapidly expanding sector.
What's Changing?
Under the new rules, BNPL providers will be required to:
- Conduct proper affordability checks before approving loans
- Provide clearer information about fees and repayment terms
- Register with the Financial Conduct Authority (FCA)
- Follow stricter advertising guidelines
Why Now?
The BNPL market has exploded in popularity, particularly among younger shoppers, with transactions reaching £5.7 billion in 2022. However, research shows that many users don't fully understand the risks:
- 40% of BNPL users have missed at least one payment
- Late fees can quickly accumulate into significant debt
- Credit scores can be damaged by missed payments
Industry Reaction
While consumer groups have welcomed the changes, some BNPL companies argue that excessive regulation could limit access to credit for responsible borrowers. The government maintains that the reforms strike the right balance between consumer protection and financial innovation.
The new rules are expected to come into force by mid-2024, giving providers time to adapt their systems and processes.
