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Treasury could backtrack BNPL regulations over market fears

BNPL regulation
Image credit: Przemek Klos via Shutterstock

The government is reportedly considering scrapping plans to introduce new regulations for buy now pay later (BNPL) products due to concerns over its effect on the UK market.

First reported by Sky News, Treasury officials have reportedly been told during industry talks that major firms in the BNPL space could exit the UK if the new regulation goes through.

A spokesperson for the Treasury told UKTN: “No decisions have been made as we are reviewing the responses to our recent consultation and will report back in due course.

“Regulation of buy-now pay-later products must be proportionate so borrowers are protected, while still being able to access these useful interest-free products.”

There have been significant calls for greater oversight of the sector from consumer protection groups, regulators and in some cases, BNPL companies themselves.

The Financial Conduct Authority (FCA) has previously urged the government to go ahead with a robust system to regulate the alternative payment option.

Sweden’s Klarna, one of the biggest firms in the market, has also called for stricter regulation of the product, including the requirement for BNPL firms to report the use of the product to credit agencies.

Klarna began electively implementing customer protection policies last year, with the expectation that regulation would tighten.

Responding to the rumour that the Treasury would backtrack, financial journalist Martin Lewis wrote on Twitter that he hoped the news was not true.

“Yes, BNPL used right can help people borrow interest-free to spread necessary costs, but it’s still a debt,” Lewis wrote.

“Protection’s needed for when it’s not right. Regulation doesn’t curtail the industry, it’d just mean that for both existing firms & new entrants: Fairness rules apply like with other debt…firms must be honest that this is borrowing not market it as a lifestyle choice.”

The director of policy for Which? said: “It is incredibly concerning to hear the Treasury is considering shelving its plans to regulate the BNPL industry – especially as more people may be using credit options to make ends meet during the cost of living crisis.”