New 'buy now, pay later' rules could save shoppers 60 million pounds a year

The UK’s Financial Conduct Authority (FCA) has announced it will be introducing new rules in the Buy Now Pay Later (BNPL) market which could save consumers around 40-60 million pounds a year.

The new measures will be in force by 12 November 2019, and will prevent retailers from charging backdated interest on money that has been repaid by the consumer during the BNPL offer periods.

BNPL offers tend to provide shoppers with a promotional period, often up to 12 months, where they don’t have to make payments and are not charged interest. If, however, the shopper doesn’t repay the entire amount within this period, interest will be charged from the date of purchase. If a shopper pays part but not all of the amount owed they will still be charged backdated interest on that part. Typically, over a third of consumers do not repay within the offer period, incurring interest charged from the date of purchase.

The FCA said that from November, firms will not be able to charge backdated interest on money that has already been repaid during the offer period. Firms will also have to provide better information to consumers about BNPL offers, reflecting the risks as well as the benefits of the product. Additionally, firms will have to give prompts to consumers, to remind them when the offer periods are about to end.

Commenting on the news in a statement, Christopher Woolard, executive director of strategy and competition at the FCA, said: “Since taking over regulation of consumer credit in 2014, our interventions have made a real difference to consumers, especially to people who use high-cost credit. The changes we are announcing today in the BNPL sector build on these interventions. They are intended to simplify these products and make it easier for consumers to make informed decisions.”

Woolard continued: “The rules we will be implementing will not only improve the information consumers receive about BNPL offers, but will stop firms from charging backdated interest on sums repaid during the offer period. We expect the overall package of measures will save consumers around 40-60 million pounds a year and tackle the harm we identified in this market. As we have shown, we will intervene where we see harms and we remain vigilant in this and other sectors.”

The rules for the disclosure measures will come into force on 12 September 2019, while the partial repayment rule, which will prevent backdated interest from being charged on repaid amounts, will come into effect on 12 November 2019.

Photo credit: Pexels, rawpixel.com

 

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