A great discussion on the future of short-term loans was brought about by the British parliament, which announced tightening the rules of granting them. According to market representatives, the proposed end-of-year consultation deadline and implementation of changes starting from mid-2023 are too remote. They believe it will paralyse the sector, while consumers will be left unprotected and will take out more and more loans, which will result in a wave of debt in the society.

British regulators indicate insufficient regulations for the BNPL market compared to ordinary services offered on the financial market. The new draft legislation imposes additional requirements on BNPL providers, related to customer protection, carrying out affordability checks and ensuring that BNPL advertisements are fair and not misleading. In addition, lenders offering the service will need to be approved by the Financial Conduct Authority – the British supervisory authority.

Consumer rights champions point to huge indebtedness of the British people, caused by too easy access to short-term loans and by advertisements of those products, which show an untrue picture of deferred payments. Another important cause is the lack of education on personal finance management and unawareness of the repercussions around failed repayments and credit scoring.

‘Buy Now Pay Later’ is a financial service available on e-commerce websites, offered by banks and non-bank lending institutions. It makes it possible to defer payment for products, usually by 30 to 50 days.

More information can be found at: https://www.finextra.com/newsarticle/40487/uk-sets-out-tougher-bnpl-rules/risk.