Proposed new regulations for the 'buy now, pay later' (BNPL) sector, designed to protect consumers, could inadvertently lead to millions of individuals being shut out of these services, according to warnings from several consumer advocacy groups. The overhaul of the burgeoning £14 billion market is set to introduce more stringent affordability checks for lenders, bringing BNPL products closer to traditional credit offerings under the regulatory umbrella.
The move to regulate BNPL, which allows consumers to spread the cost of purchases over several instalments, comes amidst growing concerns about potential debt accumulation. While popular for their ease of use and often interest-free terms, these services have largely operated outside the direct purview of the Financial Conduct Authority (FCA), unlike credit cards or personal loans. The proposed changes aim to address this regulatory gap, ensuring a more consistent approach to consumer protection across all forms of credit.
However, consumer groups argue that while stronger affordability assessments are vital, the current proposals might be too broad or lack the necessary nuance. They fear that individuals with irregular incomes, those new to credit, or those with thin credit files – many of whom currently use BNPL responsibly – could be unfairly deemed ineligible. This could push vulnerable consumers towards less regulated or more expensive credit options, or simply deny them access to a payment method they rely on.
The government's consultation on the new regulatory framework has highlighted the balancing act required: protecting consumers from excessive debt without stifling innovation or excluding legitimate users. The BNPL market has expanded significantly in recent years, becoming a mainstream payment option for a wide array of goods and services, from fashion to household electronics. Its appeal lies in its flexibility and perceived simplicity compared to traditional credit products.
As discussions continue, industry stakeholders and consumer advocates are urging policymakers to refine the proposals to ensure they are proportionate and do not create unintended negative consequences. The objective remains to foster a safe and sustainable BNPL market that serves all consumers fairly, preventing over-indebtedness while maintaining accessibility for those who can afford it.