Financial Conduct Authority
FCA publishes final rules on Buy Now Pay Later products
The Financial Conduct Authority (FCA) yesterday confirmed it will introduce new rules in the Buy Now Pay Later (BNPL) market, saving consumers around £40-60 million a year. The changes, which include banning firms from charging backdated interest on money that has been repaid by the consumer during the BNPL offer period, will be in force by 12 November 2019.
The measures are designed to reduce the harm experienced by some consumers who buy products using BNPL credit offers. There are a range of firms who offer BNPL as part of their credit offers; these include catalogue credit, store cards and retailers who offer finance at the point of sale (this can be in-store or online).
BNPL offers tend to provide a promotional period, typically up to 12 months, during which consumers do not have to make payments and are not charged interest. However, if the consumer does not repay the entire amount within this period, then interest will usually be charged from the date of purchase. Consumers who repay part but not all of the amount owed are still charged backdated interest on that part. Typically, over a third of consumers do not repay within the offer period, incurring interest charged from the date of purchase.
The proposals confirmed yesterday mean:
- Firms cannot charge backdated interest on amounts of money that have been repaid by the consumer during the BNPL offer period.
- Firms have to provide better information to consumers about BNPL offers. The information should be more balanced and appropriately reflect the risks as well as the benefits of the product.
- Firms must give prompts to consumers, to remind them when the offer period is about to end, so that consumers are more likely to repay the credit before they incur interest.
Christopher Woolard, Executive Director of Strategy and Competition, at the FCA, yesterday said:
‘Since taking over regulation of consumer credit in 2014, our interventions have made a real difference to consumers, especially to people who use high-cost credit. The changes we are announcing today in the BNPL sector build on these interventions. They are intended to simplify these products and make it easier for consumers to make informed decisions.
‘The rules we will be implementing will not only improve the information consumers receive about BNPL offers, but will stop firms from charging backdated interest on sums repaid during the offer period. We expect the overall package of measures will save consumers around £40-60 million a year and tackle the harm we identified in this market. As we have shown, we will intervene where we see harms and we remain vigilant in this and other sectors.’
The rules for the disclosure measures will come into force on 12 September 2019. The partial repayment rule, which will prevent backdated interest from being charged on repaid amounts, will come into effect on 12 November 2019.
Notes to editors
- PS19/17: Buy Now Pay Later offers – feedback on CP18/43 and final rules.
- CP18/43: High-Cost Credit Review: Feedback on CP18/12 with final rules and guidance and consultation on Buy Now Pay Later offers.
- Further information on the work of the Financial Conduct Authority in the high-cost credit sector.
- On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms, including logbook lenders, payday lenders and debt management firms.
- On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.
Latest News from
Financial Conduct Authority
FCA highlights concerns when credit firms allow repeat borrowing07/08/2020 12:25:00
The FCA yesterday published the findings of a review into relending by firms that offer high-cost credit.
FCA consults on new rules to improve open-ended property fund structures04/08/2020 12:25:00
The Financial Conduct Authority (FCA) is consulting on proposals to reduce the potential for harm to investors from the liquidity mismatch in open-ended property funds.
New guidance to help firms do more for vulnerable consumers30/07/2020 16:20:00
The FCA has set out new best practice guidance for firms to do more to protect vulnerable consumers.
FCA to ban motor finance discretionary commission models29/07/2020 13:38:00
The FCA yesterday confirmed it will introduce a ban on discretionary commission models. This followed a consultation in October 2019.
FCA launches enhanced Financial Services Register to protect consumers28/07/2020 14:10:00
The FCA yesterday launched its updated Financial Services (FS) Register – including a simpler design and clearer language.
FCA seeks views on extending the implementation deadlines for the Certification Regime and Conduct Rules20/07/2020 12:25:00
The FCA recently (17 July 2020) published a consultation paper on making changes to its rules following the extension to the deadline by which FCA solo-regulated firms need to have implemented the Certification Regime.
FCA and City Corporation collaborate to help innovative companies drive recovery from coronavirus17/07/2020 12:25:00
The FCA and the City of London Corporation will collaborate on the pilot of a ‘digital sandbox’ to support innovative firms tackling challenges caused by the coronavirus (Covid-19) pandemic.
FCA provides guidance to firms on maintaining access to cash for customers16/07/2020 15:38:00
The FCA has today published draft guidance for firms setting out its expectations for banks, building societies and credit unions when they are considering closing branches or ATMs, or converting a free to use ATM to pay to use.
FCA confirms further support for motor finance and high-cost credit customers16/07/2020 12:25:00
The FCA yesterday confirmed the support that will be available for users of motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products, who continue to face payment difficulties due to coronavirus (Covid-19).