UK shoppers may be at risk of financial loss as plans to regulate the Buy Now, Pay Later (BNPL) sector are further delayed. The government has postponed the publication of its response to the consultation on BNPL regulation due to concerns that it could lead to the removal of these interest-free loan products from the market. Many BNPL providers have expressed their intention to leave the UK if the proposed changes are implemented, as the new regulations would impact their profits and potentially lead to business closures. The government is worried about restricting access to BNPL options during a time of rising living costs.
Concerns over the delay
The delay in implementing BNPL regulation is bad news for consumers, as it means that these products are not subject to the same rules and protections as other credit agreements. Banks, for example, are required to conduct thorough checks to ensure that customers can afford the loans they are being offered. BNPL providers are not subject to the same level of scrutiny, although some have introduced voluntary checks. Furthermore, consumers who use regulated financial firms are protected by the Financial Ombudsman Service (FOS), but BNPL users currently cannot seek recourse through the FOS. The ongoing delays in regulation have resulted in millions of users losing more than a year of FOS protection.
Why regulate BNPL?
BNPL products allow consumers to spread the cost of purchases over a specific period without charging interest. However, late payment fees may apply. Due to the lack of regulation, BNPL users are not covered by the same protections as those who use other credit agreements. The absence of stringent checks and oversight means that consumers may be at risk of taking on debt they cannot afford. Labour MP Stella Creasy has been advocating for BNPL regulation for years and has criticized the government for prioritizing the interests of BNPL firms over those of consumers.
Using BNPL responsibly
BNPL plans can be a useful way of managing finances when used correctly. It is important to keep track of payment deadlines and ensure that there are sufficient funds in the account to make the payments. Late payments can result in additional fees and a negative impact on credit scores. It is also crucial not to rely too heavily on BNPL products and to consider alternative options such as 0% credit cards or overdrafts. Consumers should only use BNPL if they can afford to repay the debt and should avoid spending beyond their means.
Did you miss our previous article…
https://hellofaread.com/money/single-mum-wins-fight-with-government-department-over-12k-universal-credit-payment/
