Shoppers will be protected by new rules for 'buy now, pay later' firms
by Daily Mail Reporter · Mail OnlineShoppers will be protected by new rules when they make purchases using buy now pay later under government plans.
BNPL products spread the cost of a shop over time, but there have been concerns that people overstretch themselves by taking on too much debt.
The Government has launched a consultation on bringing buy now pay later companies, such as Klarna and Afterpay, under the supervision of the Financial Conduct Authority and applying the Consumer Credit Act, to help ensure borrowers receive clear information and have strong rights when issues arise.
The plans would allow the FCA to apply rules on affordability, meaning companies will be required to check that shoppers are able to meet repayments.
The consultation will close on November 29.
Final legislation is expected to be laid in Parliament in early 2025, with the rules taking effect in 2026.
BNPL allows customers to take out a loan for a specific purchase, which they are then able to repay in installments, often with an initial interest-free period.
However companies are not required to run credit checks on their users, leaving those already financially vulnerable at risk of racking up even more debt if they fail to pay back the loan in time.
There are also concerns that people are tempted by the schemes to buy more than they can afford, a fear compounded by the fact that some firms offer discounts as high as 50 per cent.
Mike Ashley's Frasers Group, which includes Sports Direct, House of Fraser and Flannels, is among large retailers that use the practice.