Government plans to regulate Buy Now Pay Later

The government plans to regulate Buy Now Pay Later (BNPL) and to overhaul consumer credit legislation, according to a June 2022 round-up of financial regulation news¹. The plans sit alongside the Financial Services and Markets Bill, described as the most important bill in the Queen's Speech and a bumper collection of financial regulation changes¹.

Martin Lewis has criticised the speed of the BNPL plans, saying the process is taking far too long¹. The criticism comes as one-third of BNPL users already cannot afford repayments¹. The round-up also cites Klarna's problems as a possible sign of a coming recession¹.

The Financial Services and Markets Bill contains an "international competitiveness" mandate for the UK's financial regulators, which the Treasury Select Committee has warned against¹.

Separately, the round-up reports a 40% rise in automated push payment (APP) fraud, where criminals pretend to be someone the victim knows¹. The government plans to introduce new regulation in response¹. It also reports that more people are turning to high cost lenders¹.

On other regulatory matters, the round-up says regulators are going to introduce capital rules for crypto¹, and that the new UK Infrastructure Bank has published its first strategic plan¹.

Why it matters for households

Buy Now Pay Later lets shoppers split payments for goods, often without interest, and the sector has so far operated outside the rules that cover other forms of credit. The government's stated intention to regulate it means the framework around these products is set to change, though the round-up gives no date for when new rules would take effect¹. Until rules are in place, the position for people using BNPL is unchanged.

The reported figure that one-third of users cannot afford repayments indicates the scale of borrowing involved¹. The separate plan to overhaul consumer credit legislation would affect the wider market for credit, not only BNPL¹.

The 40% rise in APP fraud matters to anyone who moves money by bank transfer, since these scams involve payments the customer authorises. The government's planned regulation follows that increase¹.

What happens next

The Financial Services and Markets Bill, the BNPL regulation and the overhaul of consumer credit legislation are all described as plans rather than completed measures, and no dates for implementation are given¹. The round-up does not report a timetable for the BNPL rules, for the consumer credit overhaul or for the APP fraud regulation¹.