Comment: Government plans to regulate BNPL

Commenting on the UK government’s plans to bring Buy Now Pay Later (BNPL) products under regulatory oversight Elliot Reader, Senior Vice President in Houlihan Lokey’s FinTech Group said:

 
“The trajectory of the buy-now-pay-later market will be largely dependent on the level of regulation placed on the sector – a delicate balancing act between protecting consumers and providing them with access to suitable financial products. 

The six-week consultation period highlights the focus in bringing this to a conclusion swiftly. The FCA expects to take on regulation of the sector 12 months after legislation is made. The clarity on the direction of regulation will be welcomed, however we suspect a key focus during the consultation period for BNPL firms will be the role of Financial Ombudsman Service, given the level of cost this can place on firms.

25% of UK BNPL users have been charged with late payment fees according to research by the Centre for Financial Capability, which indicates there is a need to either improve underwriting and affordability standards or educate borrowers on the potential implications and consequences of using such a product. The outcomes of the legislation that the government is proposing aims to address these through the provision of clear information to consumers in line with Consumer Duty, and the FCA setting the rules around affordability.”