In an effort to curtail “unconstrained borrowing,” the UK government has revealed long-awaited measures to regulate “buy-now, pay-later” enterprises. The new regulations, according to the Treasury, will protect up to 10 million people from exposure to financial risk. Better affordability checks on borrowers will be required, and lenders will need to provide clearer loan information. Customers will also be able to complain to the Financial Ombudsman about businesses. Under the proposals, the Financial Conduct Authority (FCA) would have more authority to punish companies that violate the law, including by forbidding them from making additional loans. Additionally, businesses would be subject to stricter regulations when advertising their goods and would need to get FCA licenses. Buy-now, pay-later merchandise enables customers to make interest-free installment payments for purchases. However, despite their increased popularity, especially among young people, they are still mostly unregulated, which raises concerns about people accruing debt. Users are also not entitled to a grace period if they are unable to make a payment or receive reimbursement in the event of a mistake.

Martin Lewis, a campaigner for consumers, claims that the government has been “painfully slow” in moving legislation ahead since first promising to regulate the industry in 2021. After identifying possible harm to clients, the FCA ordered the four largest buy-now, pay-later operators, Clearpay, Klarna, Laybuy, and Openpay, to alter their contracts in February of last year. But because there was no explicit legislation, it was forced to employ consumer rights law. The new draft guidelines are currently being discussed by the government. The Treasury has made the proposals available, and the deadline for submissions is April 11th.