HM Treasury Regulation of Buy Now Pay Later, Response to consultation - Which? response

Summary

Which? welcomes the opportunity to further respond to HM Treasury’s consultation on the regulation of Buy Now Pay Later (BNPL).

• Whilst we recognise the challenges in determining the scope of BNPL regulation, we have concerns around how long it is taking HM Treasury to introduce regulation. Which? urges HM Treasury to consider options that would mean regulation is in place earlier. This is particularly important given recent evidence of consumer dependency on BNPL to avert current cost of living pressures, as well as some BNPL providers encouraging consumers to use this form of credit on essentials like groceries.
• We welcome the move to include certain Short Term Interest Free Credit (STIFC) products within the remit of regulation. However, merchant-provided credit should be in scope as well as third-party lending to ensure consumers’ levels of indebtedness are visible in their totality, as far as possible, when future affordability assessments are carried out.
• We are pleased that the consumer protections proposed by HM Treasury for the regulation of BNPL are largely intact - particularly Section 75 rights and access to the Financial Ombudsman Service (FOS). Which?’s recent research on BNPL shows that some consumers have a lack of understanding of BNPL products, with many assuming that the product is regulated. Hence, we are concerned that splitting out the increasingly similar BNPL from STIFC will make it even more complicated for consumers to distinguish between regulated and unregulated products. The same consumer protections should be in place for STIFC products to prevent consumer confusion.
• We are also pleased with HM Treasury’s commitment to review the Consumer Credit Act (CCA). This has the potential to align the infrastructure of wider credit products following the tailored approach to provisions being considered for BNPL. However, it is imperative that this review does not delay the regulation of BNPL.
• We reiterate the point made in our previous response that the regulation of BNPL should be future-proofed as far as possible. Regulation should take the proliferation of the BNPL market into account, and have the ability to quickly adapt to other variations that may arise.