The UK government is considering backtracking on its plans to impose stricter regulations on the burgeoning buy now pay later (BNPL) industry.
The decision comes after reports that some of the industry’s major players have threatened to exit the UK market, should they face stringent regulations. The Treasury, which had initiated a consultation in February on the FCA’s regulation of the growing BNPL sector, is now thought to be veering away from its initial proposal.
The proposed regulations by the FCA included making credit agreements explicit and ensuring people understood the risks associated with BNPL services. Another key proposal was applying section 75 of the Consumer Credit Act to BNPL providers, making them jointly accountable for the contract with the retailer, similar to credit card providers.
These recommendations, however, have been criticised by Innovate Finance, the FinTech industry body, as being more burdensome than those currently imposed on credit cards.
The Treasury’s potential shift away from enforcing these regulations is also driven by apprehensions that they could limit the availability of low-interest products. Although a final decision has yet to be reached, delays to BNPL regulations have already incited a reaction from consumer campaign groups.
They argue that the absence of regulatory controls could exacerbate debt among financially strapped consumers. Consumer group Which? has specifically requested stronger safeguards, citing their research that indicates shoppers often view BNPL products as budgeting tools rather than credit.
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