The UK government has announced long-awaited regulations to control “buy-now, pay-later” businesses in an effort to stop “unconstrained borrowing.” Borrowers’ affordability will need to be more thoroughly checked, and lenders will need to give borrowers clearer loan information. Under the proposed changes, the Financial Conduct Authority (FCA) would have greater authority to penalize businesses that violate the law, including prohibiting them from making additional loans. Businesses would also be subject to stricter rules when marketing their products and would require FCA licenses. Buy-now, pay-later products are becoming more and more popular, especially among young people, but they are still mostly unregulated, which raises concerns about consumers piling up debt. Additionally, users are not entitled to a grace period if they are unable to complete a payment or request a refund if something goes wrong.

Consumer supporter Martin Lewis said that since originally proposing to regulate the industry in 2021, the government has been “painfully slow” in moving legislation forward. The FCA ordered the four main buy-now, pay-later companies, Clearpay, Klarna, Laybuy, and Openpay, to modify their contracts in February of last year after finding potential harm to customers. But it had to use consumer rights law because there were no clear guidelines. The government is presently discussing the new draft regulations. The deadline for submissions is April 11th, and the Treasury has made the suggestions public.