Treasury consults on BNPL

Treasury has published the long-awaited consultation on BNPL.

The Government has decided largely to follow the policy decision that the previous Government seemed on the cusp of making – that is that all “deferred payment credit” (DPC) agreements offered by a third party lender will no longer be exempt and so firms offering them will need to be FCA authorised. Agreements such as those facilitated by employers or Registered Social Landlords will stay outside regulation. Similarly, agreements under which credit is provided directly by the merchant will remain exempt, as will arrangements for spreading the cost of insurance premiums. The legislation will be formulated so as to create a new category of regulated credit called a “Regulated Deferred Credit Agreement” and agreements that meet this definition will fall outside the Article 60F(2) RAO exemption.

Where agreements are regulated, the FCA will have power to make appropriate and bespoke rules, rather than applying the disclosure requirements in the CCA.

Key principles underpinning the regulation will be:

• clear information, in line with the Consumer Duty;
• key statutory rights, such as CCA s75 protections;
• complaints handling rules and access to the FOS;
• requirement for FCA authorisation; and
• FCA rules on affordability and creditworthiness assessments.

The consultation includes draft legislation, which will create three new regulated activities in respect of regulated DPCs:

• entering into a regulated DPC agreement as lender;
• exercising, or having the right to exercise, the lender’s rights and duties under a regulated DPC agreement; and
• credit broking (for domestic premises suppliers that offer newly regulated agreements).

Separately, the consultation recognises that the CCA reforms previously consulted on are still needed, and there will be further reform proposals in due course.

The FCA has welcomed the consultation and will consult on its regime soon after the legislation is finalised. It expects to take on regulation of the sector 12 months after the legislation is made and will give firms time to prepare for the new requirements. It plans to put in place a TPR to allow firms already in business to continue with it while their application is assessed.

Treasury’s consultation closes on 29 November.