The UK plans to regulate Buy-Now-Pay-Later (BNPL) sector, saying it poses potential harm to consumers without thorough affordability checks. Providers such as Klarna, Clearpay, and PayPal will be required to give consumers key information about their loans and issue affordable credit. At the same time, users will have the right to take complaints to the Financial Ombudsman Service. The BNPL sector in the UK nearly quadrupled during the pandemic in 2020 to 2.7 billion pounds ($3.28 billion).
In February 2022, 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.
Buy Now Pay Later borrowing can be like quicksand – easy to slip into and very difficult to get out of,” said
Matthew Upton, director of policy at consumer group Citizens Advice
The UK finance ministry launched a public consultation on Tuesday on legislation to regulate BNPL, giving the Financial Conduct Authority (FCA) powers to authorize operators and their activities. 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.
