As third-party Buy Now Pay Later (BNPL) becomes regulated credit, the landscape for consumer borrowing is shifting. For charity practitioners supporting individuals with money and finances, here is a quick summary from our Director of Adult Financial Wellbeing Programmes, Rhiannon Byers, on what these changes mean—and where risks remain.
What’s Changing for UK Consumers
- Affordability Counts: Regulated BNPL providers like Klarna, Clearpay and Paypal now need to have proportionate checks of whether individuals can afford to repay – potentially using soft (and/or hard) searches of credit files and other data.
- Clear Communications: Providers need to provide clear information to users on any credit checks they are running, repayments amounts and schedules, and how fees for late / missed payments work.
- Better Protections: S75 protection has been extended to new purchases £100-£30,000 made via FCA regulated BNPL providers, and people can now escalate complaints to the Financial Ombudsman. FCA Regulated BNPL providers will need to offer better standards of support for people struggling to repay.
What Isn’t Changing
- Direct Retailer Schemes Excluded: Regulation applies to third-party providers, not deferred payments offered directly by retailers.
- Behaviours Matter: BNPL can still be positioned as the default / attractive option at Point of Sale. Consumers will still need to keep track when various BNPL payments are due and budget for these payments.
- Debt Stacking and Escalation: BNPL repayments can be made via credit cards. Fees and late payment charges can still add up, especially where consumers use multiple agreements, and unpaid BNPL can still be passed to Debt Collection Agencies.
It remains unclear how BNPL applications and rejections will ultimately affect credit scores long-term. And we don’t yet know how regulation will affect usage given that 10.9 million UK adults (20%) used BNPL in the 12 months to May 2024.
While FCA regulation introduces much-needed consumer protections and Ombudsman recourse, BNPL remains, for some, a seamless route to over-indebtedness. Practitioners should continue helping people build positive habits to manage any BNPL and watch out for multi-provider commitments and debt-stacking.
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