The Financial Conduct Authority (FCA) has unveiled long-awaited plans to regulate the booming £13 billion ‘buy now, pay later’ (BNPL) sector — with proposals that could require affordability checks on even the smallest of loans.
Under the new rules, which form part of a formal consultation launched on Friday, BNPL lenders would need to conduct creditworthiness assessments on loans under £50 — a measure the regulator says is necessary to protect consumers from spiralling debt and financial harm.
The FCA said BNPL has evolved from a fringe product into a mainstream payment method, used by 10.9 million UK adults in the 12 months to May 2024. Around 1.1 million of these individuals had BNPL debts of £500 or more, while more than 5 million owed at least £50. Over half of all BNPL agreements currently involve loans under £50, which the FCA argues must be included in the scope of new rules to prevent widespread harm and “loan stacking” across multiple providers.
The proposals mark a significant shift in how short-term credit is treated, with firms like Klarna, Clearpay and Laybuy among the major lenders expected to come under the new regime.
Sarah Pritchard, the FCA’s deputy chief executive, said the regulator had been seeking oversight of the sector for some time amid concerns about its explosive growth.
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