HM Treasury’s Regulation of Buy-Now, Pay Later - Consultation on Draft Legislation - Which? response

Which? is delighted that the new Government has moved swiftly to regulate BNPL. 

We are generally supportive of the proposals set out by HM Treasury to bring BNPL into regulation. The proposed approach includes many crucial elements of consumer protection which will help to tackle the harms highlighted in the Woolard review. We particularly welcome that the proposed regulatory regime will include affordability assessments, mandatory reporting to Credit Reference Agencies (CRAs), Section 75 protections from the Consumer Credit Act (CCA) 1974, and access to the Financial Ombudsman Scheme. However, we urge HMT to consider the following recommendations as it makes decisions over the scope and content of the regime, and the speed with which it is introduced: 

• Disapplying CCA provisions removes valuable consumer protections and associated sanctions, particularly in relation to pre-contractual information. HMT should reconsider its approach. We suggest applying a simplified version of the pre-contractual provisions to BNPL arrangements, which would mean the ‘unenforceability sanctions’ attached to section 55 of the CCA would still apply. 

• In addition, HM Treasury should: 
  • continue to make clear that the outcomes of this process are not determinative of the regulatory regime that will be put in place for reform of the CCA. Credit products can be complex and there is a huge variety of them. Regulation that is considered appropriate for BNPL would not be suitable for other credit products. 
  • reconsider the proposed exemption for merchant-provided credit since there is evidence of big tech offering its own BNPL products, and these firms have the capacity to expand their offering at short notice. 
  • give a clear direction that mandatory credit reporting should be in place ahead of regulation of BNPL and it must be appropriate for BNPL agreements. 
  • ensure regulation comes into force as soon as possible. 
  • bring forward the timelines for its proposed review of BNPL regulation. 
  • consider actions to restrict usage of the term ‘Buy-Now Pay Later’.