The Financial Conduct Authority (FCA) has welcomed the
government’s consultation on regulating currently-exempt Buy Now Pay Later
(BNPL) products.
The FCA has long supported bringing these products under its
regulatory oversight. In 2021, the FCA board backed the Woolard Review, which
recommended that BNPL should be regulated.
The FCA plans to implement a
Temporary Permissions Regime (TPR), allowing firms to continue BNPL activities
while their applications are processed. Firms operating under the TPR will need
to comply with FCA rules, and the regulator will take action where necessary.
FCA Consults on BNPL Rules
BNPL offers consumers more payment options and supports
merchants, but it also carries risks similar to other credit products. The FCA
plans to consult on its regulatory approach for BNPL after legislation is
finalized, proposing rules for authorizing firms and safeguarding consumers
while allowing firms to innovate and grow.
“We will consult shortly after legislation is finalised on
our regulatory regime for BNPL. This will include our proposed rules and
approach to authorising firms. We want to ensure those who find BNPL helpful
can still benefit from it, firms can innovate and grow, and consumers are
appropriately protected,” the regulator stated.
The FCA
will consider feedback before finalizing its rules, conducting a cost-benefit
analysis to ensure proportionate regulation. Firms will be given a brief period
to prepare before the rules come into effect. Regulation of the sector is
expected to commence 12 months after the legislation is made.
The Treasury is set to unveil its plans for buy-now-pay-later (BNPL) rules tomorrow, in a move that could end years of uncertainty surrounding the regulation of the sector, City AM has learned.Read the full story here 👇https://t.co/nACoic9a4K
— City A.M. (@CityAM) October 17, 2024
Implementing Temporary Permissions Regime
The regulation will ensure positive outcomes for borrowers
and align with existing rules for other credit providers. Firms will be
required to provide clear information to consumers and conduct affordability
and creditworthiness checks.
BNPL firms will also fall under the Consumer Duty,
and consumers will have the right to raise complaints with the Financial
Ombudsman Service.
Once the rules are finalized, BNPL firms currently
unauthorised to lend will need to apply for authorisation. Merchants offering
credit agreements from third-party lenders will also need to apply for credit
broking authorisation.
The FCA will assess applications and seek further
information if necessary before deciding on authorisation.
This article was written by Tareq Sikder at www.financemagnates.com.
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