The UK government has said it will give financial watchdogs more powers to ‘clamp down’ on BNPL firms as it prepares to publish a regulatory update.
According to City AM, the Treasury will lay out the details of regulation that will involve plans to bring companies like Klarna and Cleapay under the full remit of the FCA and give it powers to withdraw firms’ authorisation to operate in the UK.
The publication added that rules around creditworthiness are also set to be applied to the sector, requiring BNPL firms to ramp up checks on consumers and issue credit that is ‘genuinely affordable’.
Consumers will also be allowed to take disputes over credit to the Financial Ombudsman Service under the scope of the planned rules.
City minister Andrew Griffith said people should be able to access affordable credit, but ‘with clear protections in place’. He added, “That is why these proposed regulations are so important.”
Ministers are now enabling industry to weigh in on the scope of the rules over the next eight weeks with plans to lay secondary legislation in UK parliament by the middle of 2023.
Zilch CEO and co-founder Philip Belamant said, “We hope that today’s announcement will spur the acceleration for proportionate regulation in both the BNPL and wider credit lending ecosystem, creating a responsible and sustainable environment for customers in the UK and, perhaps, a blueprint for regulators and governments around the world to learn from and replicate.”
Tranch, a BNPL firm for SaaS sellers and services providers, has recently raised $100m in seed equity and debt funding.
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