Major consumer advocacy groups, including Money Saving Expert (MSE), Citizens Advice, and Which?, have issued a stark warning following reports that the Government is set to abandon its plans to regulate the Buy Now, Pay Later (BNPL) industry. These organisations argue that such a decision would be a significant setback for consumer protection and could lead to a surge in unmanageable debt for vulnerable individuals across the UK.
For several years, there have been calls for stricter oversight of BNPL services, which allow consumers to spread the cost of purchases over interest-free instalments. While popular for their convenience, critics argue that the lack of robust affordability checks, typical of traditional credit products, can lead people to take on more debt than they can comfortably repay. The absence of regulation means BNPL providers currently operate outside the scope of the Financial Conduct Authority (FCA), leaving consumers with fewer protections and less recourse if things go wrong.
The Government had previously committed to bringing BNPL products under FCA regulation, a move widely supported by consumer groups and some within the financial services industry. This commitment followed a review by the Woolard Report in 2021, which highlighted the potential for harm and recommended urgent action. The proposed regulations would have introduced mandatory affordability assessments, clear information requirements, and access to the Financial Ombudsman Service for complaints.
Martin Lewis, founder of Money Saving Expert, expressed profound disappointment, stating that scrapping regulation would be a "disaster" for consumers. Citizens Advice highlighted that many people are already struggling with the cost of living crisis, and unregulated BNPL could push them further into debt. Which? echoed these sentiments, emphasising the need for consistent consumer protections across all forms of credit.
The reported policy reversal, if confirmed, would represent a significant shift from the Government's earlier position. While the Treasury has not yet made an official statement regarding these reports, the implications for millions of UK shoppers who use BNPL services are substantial. Without regulation, the rapid growth of the sector could continue unchecked, potentially exacerbating financial hardship for those least able to afford it.
Opposition parties are expected to scrutinise any such decision closely, raising questions about the Government's commitment to consumer safeguarding. The Labour Party has previously called for stronger regulation of BNPL, arguing that it is essential to prevent a debt crisis among younger generations and those on lower incomes.