The UK government is set to introduce regulations on BNPL products, aiming to protect consumers and promote responsible lending practices.
A consultation on the draft legislation began on Oct 17th and will remain open until Nov 29th, with legislation expected to follow based on the feedback.
The proposed regulation aims to enforce affordability checks, clear disclosures, and protections under the Consumer Duty, aligning BNPL with existing credit card rules, much like what the US recently did. The government would offer a transition period for BNPL companies to catch up to speed, to avoid disruptions in the market.
Meanwhile in the USA…
The Financial Technology Association filed a lawsuit challenging the CFPB's new rule on BNPL products, saying that the rule “oversteps legal bounds.” In May, the CFPB ruled that BNPL vendors are classified as credit card providers and must provide the same legal protections and rights to consumers as conventional cards, such as the right to dispute charges and demand a refund from the lender.
FTA President and CEO Penny Lee said, “Unfortunately, the CFPB’s rushed interpretative rule falls short on multiple counts, oversteps legal bounds, and risks creating confusion for consumers. The CFPB is seeking to fundamentally change the regulatory treatment of pay-in-four BNPL products without adhering to required rulemaking procedures, in excess of its statutory authority, and in an unreasonable manner.”
Is it a thing now that whenever opposition doesn't like a new rule, they say it was “rushed”? It took the CFPB like 2+ years just to come up with that! It may not be great, but it certainly wasn't rushed…