As reported by an expert in the field of international financial law Konstantin Kryvopust, the UK’s new Labor government has announced that it will soon draw up updated plans to regulate the buy-now, pay-later (BNPL) industry. The government will soon unveil the plan, which is expected to emerge after several delays in developing a road map for the BNPL legislation.
As notes CNBC, the government proposed to update regulation for the sector in 2021 after an analysis by the Financial Conduct Authority found that more than 10% of BNPL’s customers have overdue debt.
Most of BNPL’s businesses generate revenue by charging a per-transaction fee to their merchant partners, rather than charging interest or penalties for late payments. However, some companies charge fees for missed payments, leading to a lack of standardization in the industry.
Inconsistency in service delivery among BNPL providers is one of the reasons why campaigners are calling for regulation. Another significant problem is the increasing indebtedness among consumers, especially young people, who often accumulate debts from several non-performing loan providers that they are unable to repay.
Under the previous conservative government, efforts to regulate the non-performing loan sector were repeatedly delayed. This was largely due to the political situation in the United Kingdom, which will see three Prime Ministers change in 2022, and lobbying by the big players in the industry.
In a policy document released in 2023, the government proposed applying elements of the existing rules for major lenders and credit card companies to BNPL’s plans. These proposed rules include increased disclosure, certain exemptions for lenders and oversight by the Financial Conduct Authority (FCA).
BNPL firms Klarna and Block have opposed the proposed measures, saying they risk pushing people towards more expensive lending options such as credit cards and finance plans.
