Emma RadmoreThe Government has finally published its response to its consultations on regulation of buy-now-pay-later products and services and laid the necessary legislation before Parliament.
The Government had already decided that the BNPL products that should no longer benefit from the article 60F(2) RAO exemption would be those offered by third-party providers – so that those offered by merchants would continue to benefit so long as the products met the conditions of the article. It subsequently consulted on the draft legislation it had drafted to achieve the changes.
However, in response to the draft consultation, it received many representations that allowing merchants to carry on using the exemption created an unlevel playing field, and particularly expressing concerns that large tech and e-commerce platforms would start offering BNPL agreements on a similar scale to third-party lenders. The Government acknowledges this risk but says it is important that low-risk everyday transactions should continue to be within the exemption.� It will monitor developments and respond it if sees any significant change or potential consumer harm.
The Government also intends to proceed with its proposals:
- to disapply the CCA information disclosure requirements to BNPL products, so that the FCA can draft its own bespoke rules;
- to retain the possibility for the court to make time orders where appropriate; and
- to exempt most merchants from the need to become authorised credit brokers in order to promote BNPL products; and
- urgently to put in place a temporary permissions regime for firms needing authorisation.
Once the enabling legislation is made, the FCA will then have 12 months to draft, consult on and finalise its rules, and regulation will start from mid-2026. The FCA will consult soon on its rules and will, in its consultation, set out its timescales.