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Buy now, pay later regulation still urgently needed warns Martin Lewis – as report suggests vital new laws could be shelved

Plans to give buy now, pay later users much-needed new rights and protections should not be scrapped, founder Martin Lewis has urged. It comes as a report has emerged that the Government plans to delay the introduction of vital new laws.

Earlier this year, the Government published draft laws to bring buy now, pay later (BNPL) services into regulation, which would give borrowers powerful new rights and protections, including the ability to request Section 75 refunds and to escalate complaints to the free, independent Financial Ombudsman Service. 

But the Government is now said to be considering "shelving" the plans over concerns that some major BNPL lenders could quit the UK market if regulation is too "heavy-handed", according to a report from Sky News. A Government spokesperson told MoneySavingExpert (MSE) "no decisions have been made", adding that the Treasury was reviewing the responses to its recent consultation and would report back "in due course".

Martin initially responded to the news on Twitter on 17 July. You can read Martin's tweet in full below. On 18 July, a coalition of consumer groups and debt advice providers, including and Martin, sent a joint letter to the Chancellor Jeremy Hunt, urging him and the Government to push forward with the planned BNPL rules in order to protect consumers. You can read the full letter below.

MSE and Martin have long called for urgent regulation of BNPL products amid the "explosive growth" of this form of borrowing. For more on how it works and what to look out for, see our full Buy now, pay later guide.

Martin Lewis: 'Buy now, pay later is a DEBT – and borrowers should be given the same protections they get with other forms of debt'

Commenting on the reports that the Government might be planning to delay BNPL regulation, Martin said on Twitter:

Consumer groups and debt advice providers are also calling for the Government not to abandon regulation plans

In an open letter sent to the Chancellor Jeremy Hunt on 18 July, six organisations – including – have urged the Government to bring in the new rules to protect consumers as soon as possible:

18 July 2023

Dear Chancellor,

RE: Buy Now Pay Later regulation

We are writing as a coalition of consumer advocates and debt advice providers to urge you to reconsider reported plans to shelve the regulation of Buy Now Pay Later (BNPL). Such a move would be especially disappointing given that draft legislation is already published, it has had cross-party support, and the UK Government could therefore act swiftly to protect consumers.

With the mounting pressure of the cost of living crisis, the provision of interest free credit might look like part of the solution for people struggling with bills. But unaffordable credit which can lead to spiralling debt is never a solution. Citizens Advice’s most recent cost of living tracker shows over 1 in 6 people with BNPL say they are currently behind on payments. This rises to over 1 in 3 when we look at people on Universal Credit.

This is why regulation is more important than ever. Government must ensure that BNPL lenders are obliged to carry out affordability checks to protect against unsustainable borrowing. Whilst many are turning to BNPL to pay for essentials, it is also compounding people’s financial hardship in the cost of living context. We are particularly concerned that those already struggling to make ends meet are most likely to use BNPL because there are currently no safeguards in place to prevent people already grappling with debt to sign up.

Government should be acting to protect consumers by ensuring people are given proper information which makes it clear that BNPL is a credit product and spells out the consequences of not being able to make repayments. Without regulation of the sector, consumers risk being left unaware about the potentially serious consequences of BNPL borrowing. Too often consumers sign up for BNPL without realising that they are taking on debt, and could face late payment fees and debt collectors if they can’t pay.

As you will be aware the proposals have already been subject to extensive consultation with stakeholders to ensure that they are proportionate. In 2021 the FCA’s Woolard Review concluded that BNPL should be brought under FCA regulation urgently in order to protect consumers and make the market more sustainable. Having seen the impact of the growth of BNPL in recent years on the people who use our services, we welcomed the Government’s commitment to bring BNPL products into regulation.

To pause now, or to delay the process by merging it with the longer timelines of the review of the Consumer Credit Act, would leave people needlessly exposed to harm. We are calling for the Government to stay the course on this and for the draft legislation to be implemented at pace to protect consumers.

We are clear that BNPL is part of the consumer credit industry and must be regulated as such to protect consumers. We urge you to accelerate proposals to protect consumers during the living standards crisis.

Yours sincerely,

Dame Clare Moriarty, Chief Executive, Citizens Advice
Joanna Elson CBE, Chief Executive, Money Advice Trust
Martin Lewis CBE, Founder and Chair,
Vikki Brownridge, Chief Executive, Stepchange Debt Charity
Anabel Hoult, Chief Executive, Which?
Lisa Pearce, Interim Chief Executive, Christians Against Poverty 

What the Government's existing plans would mean for buy now, pay later borrowers – IF they go ahead

If brought into effect, the Government's planned rules would mean that:

  • Lenders would need to ensure BNPL advertising is clear, fair and not misleading. Firms such as Clearpay, Klarna and Laybuy would be required to follow existing advertising rules on financial promotions, which should ensure that advertisements are clear about BNPL being a form of credit.

  • You'd get powerful Section 75 protection on purchases made using BNPL. This would apply for items costing over £100 but not more than £30,000, as it does for credit cards currently. It means the BNPL provider would be jointly liable with the retailer if anything goes wrong. See our Section 75 guide for more info.

  • You'd have the right to complain to the Financial Ombudsman Service (FOS). Currently, the only way for most consumers to complain about BNPL firms is directly to the firm itself. However, the new legislation is designed to give consumers increased protections by enabling complaints to be taken to the FOS if the lender has failed to respond or if complainants are unhappy with the response they do get. This change would mean complaints procedures for BNPL firms are aligned with those of traditional lenders.

  • Regulator the Financial Conduct Authority (FCA) would make sure the new rules are being met by BNPL firms. Lenders offering BNPL would also need to be approved by the FCA in order to lend. Consumers would also likely face tougher affordability checks when taking out a new BNPL agreement – but this would be down to the FCA to decide and the exact details are yet to be confirmed.

How buy now, pay later works

With BNPL, instead of paying at the till or online checkout, the BNPL firm pays the retailer for you. You then agree to pay the BNPL firm back over a few weeks or months, meaning you can spread your shopping costs. It's interest-free and fee-free but miss a repayment and you risk being charged late fees.

See our Buy now, pay later guide for more information.

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