What the Buy Now, Pay Later regulation means for you

We did it! In February, the FCA decided to regulate the Buy Now Pay Later industry. We’re proud of our You Only Pay Once (#YOPO) campaign and everyone else who fought alongside us!

Last year, we launched our #YouOnlyPayOnce campaign to tackle the lack of regulation around Buy Now Pay Later schemes and promote the positive mindset that comes with only paying once.  

Our research showed that providers like Klarna, Clearpay and Afterbuy can encourage unnecessary spending, are viewed as a form of gateway debt and that people would feel less anxious and happier if they didn’t use them.  

Last year, with the pandemic wreaking havoc on people’s finances and Christmas spending just a few months away, we set out on a mission.  

We joined with campaigner Alice Tapper (founder of Go Fund Yourself) in the fight to get Buy Now Pay Later regulated. We conducted research, worked with a range of fantastic influencers, who not only shared their debt stories but also encouraged their followers to do the same, and our co-founder, Anthony, wrote to over 30 MPs to persuade them to join the fight.

Big names like MoneySavingExpert and Which? soon got involved and in February of this year, we did it! The FCA announced that they’ll be regulating the Buy Now Pay Later (BNPL) sector, bringing more accountability to these providers and protection for consumers.

What does regulation mean for you?

It’s all good talking about a change to regulate BNPL services, but what does it all actually mean? The Financial Conduct Authority is an organisation that regulates the financial services industry in the UK. Their main roles are to:

1. Protect consumers by making sure businesses are treating their customers fairly.

2. Setting rules for businesses to follow and making sure they stick to them to keep the industry stable.

3. Promoting healthy competition between financial service providers.

The FCA have taken the decision to regulate the BNPL industry which will affect businesses such as Klarna, Clearpay and Laybuy. This is a good thing for both customers and the industry as a whole as it will:

  • Offer consumers the same protection they have with other types of credit, including affordability checks before taking on a new loan and support if they subsequently struggle with repayments. This could protect shoppers against the possibility of easily racking up thousands of pounds in debt and spending more money than they could afford.
  • Make sure services like Klarna, Clearpay and Laybuy will be subject to FCA rules requiring them to undertake affordability checks on customers and treat borrowers fairly.
  • Allow consumers to complain to the Financial Ombudsman Service if they feel they’ve been treated unfairly by one of these businesses.
  • Mean that these businesses will have to tighten up their advertising practices to make it completely clear to consumers that what they are offering is debt.

What’s next?

Whilst we continue to monitor the progress of this regulation coming into force, we can’t lose sight of the fundamental issues that need to be tackled. Regulation of Buy Now Pay Later is a step in the right direction to protect consumers but we know from our annual research on the financial ‘advice gap’, that access to affordable financial advice could make a huge difference to the state of the nation’s finances.

And when we say ‘financial advice’ we don’t just mean investment advice. We mean advice on how you can be making the most of your money, whether that’s to manage your money better, save more cash or make longer-term financial decisions. Our Advice Gap report highlighted that a staggering 21 million people in the UK would benefit from advice, but are unaware of, or unable to access, free services.

Whatever your circumstances, we can give you the advice you need to get clear direction on your finances. The advice in our free app can help you to manage your money better and to save more cash, and if you feel investing is right for you, our team of friendly advisers can give you personalised advice suited to your needs.

We’re more committed than ever to our mission to make financial advice accessible and affordable to everyone.

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