Interest-free buy-now-pay-later credit agreements will be regulated by the Financial Conduct Authority (FCA) in order to protect consumers under plans announced by the government
- Interest-free buy-now-pay-later agreements will be regulated by the Financial Conduct Authority
- Government acts swiftly to protect consumers after review finds potential for harm
- Lenders will be required to carry out affordability checks on customers and ensure the vulnerable are treated fairly
Buy-now-pay-later products are rapidly increasing in popularity, with the volume of transactions tripling in 2020 as the pandemic drove online shopping, and there is now a significant risk that these agreements could cause harm to consumers.
By announcing plans to legislate to bring interest-free buy-now-pay-later into regulation, the government is acting swiftly to ensure people can continue to benefit from these products with the right protections.
The announcement comes as a review of the unsecured credit market, led by Christopher Woolard, recommends bringing interest-free buy-now-pay-later into FCA supervision.
Buy-now-pay-later can be a helpful way to manage your finances but it’s important that consumers are protected as these agreements become more popular. By stepping in and regulating, we’re making sure people are treated fairly and only offered agreements they can afford – the same protections you’d expect with other loans.
John Glen, Economic Secretary to the Treasury
The government’s decision to bring buy-now-pay-later into regulation will mitigate risks by giving the Financial Conduct Authority oversight of buy-now-pay-later providers and allowing people to escalate their complaint to the Financial Ombudsman Service if things go wrong.
Under these plans, providers will be subject to FCA rules so will need to undertake affordability checks before lending and ensure customers are treated fairly, particularly those who are vulnerable or struggling with repayments.