Entrepreneur

Buy-now pay-later firms braced for clampdown as Treasury looks to grant regulator new powers


Buy-now pay later firm Klarna welcomed the update that regulators would be granted powers to clampdown on the sector

The government said it will give City watchdogs the power to “clamp down” on buy-now pay-later firms this year as it prepares to publish a much-delayed update on the scope of regulation around the sector tomorrow morning.

The Treasury will lay out the details of regulation that will include plans to bring firms like Klarna, Laybuy and Clearpay under the full remit of the Financial Conduct Authority and give the regulator the powers to withdraw firms’ authorisation to operate in the UK.

Rules around creditworthiness are also set to be applied to the sector, requiring BNPL firms to ramp up checks on consumers and issue credit that is “genuinely affordable”, the Treasury will reveal. Consumers will also be allowed to take disputes over credit to the Financial Ombudsman Service under the scope of the planned rules.

In a statement this evening, City minister Andrew Griffith said people should be able to access affordable credit, but “with clear protections in place”. 

“That is why these proposed regulations are so important,” he added.

Ministers are now set to allow industry to weigh in on the scope of the rules over the next eight weeks with plans to lay secondary legislation in parliament by the middle of the year. The Financial Conduct Authority will then have powers to draw up the details of the rules towards the end of 2023.

The industry has been waiting for tailored rules since the landmark Woolard review warned of the “urgent” need for regulation two years ago.

However, the process has since been beset by delays, with ministers missing a self-imposed deadline to publish draft legislation and a consultation to regulate firms at the end of last year. 

The stretched timelines have proved a contentious issue in the past 12 months as debt campaigners sound the alarm over unregulated borrowing in a cost of living crunch and fintech firms call for certainty.

BNPL firms welcomed the update last night and said it was a positive first step towards rules coming into the sector. The UK chief of BNPL firm Klarna, Alex Marsh told City A.M. last night that it was “not waiting for regulation”.  

“With a cost of living crisis raging, BNPL and credit providers must follow our lead and make changes now to protect consumers,” he added. 

The chief of Zilch, which provides an already FCA regulated form of BNPL product, said a lot of firms have “paid regulation lip service but have yet to act – that’s about to change”.

“We hope that today’s announcement will spur the acceleration for proportionate regulation in both the BNPL and wider credit lending ecosystem, creating a responsible and sustainable environment for customers in the UK and, perhaps, a blueprint for regulators and governments around the world to learn from and replicate,” he added.



READ SOURCE

This website uses cookies. By continuing to use this site, you accept our use of cookies.