Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

British watchdog toughens up 'buy now, pay later' credit rules

Published 06/12/2019, 04:21 AM
Updated 06/12/2019, 04:25 AM
© Reuters.  British watchdog toughens up 'buy now, pay later' credit rules

By Huw Jones

LONDON (Reuters) - Britain's Financial Conduct Authority said on Wednesday it will ban firms from charging interest on "buy now pay later" (BNPL) credit to save consumers up to 60 million pounds ($76.3 million) a year.

The FCA said the rules will cover a range of companies who offer BNPL credit, including catalogues, store cards and retailers who offer finance at the point of sale.

BNPL usually includes a one-year offer period, during which customers do not have to make payments and are not charged interest. If the consumer does not repay the entire amount within this period, interest is charged from the date of purchase.

Consumers who repay part but not all of the amount owed are charged backdated interest on that portion, with typically more than a third of consumers not repaying within the offer period.

The FCA said that from November firms will be banned from charging backdated interest on money that a customer has already repaid during the offer period.

It is the latest intervention by the FCA to tackle high cost credit that affects vulnerable consumers in particular. It has already taken steps in the payday loan, rent-to-own and overdraft markets.

"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," Christopher Woolard, the FCA's executive director of strategy and competition, said in a statement."

"As we have shown, we will intervene where we see harms and we remain vigilant in this and other sectors."

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Firms will also have to provide better information to consumers about BNPL offers, and give "prompts" to remind consumers when an offer period is about to end.

Credit checker ClearScore said the changes will help consumers make better choices as BNPL schemes can appear very attractive but carry eye-watering interest rates, fees and charges.

"They are instantly available at store counters, which means people don't often have time to consider their options or look at the terms and conditions before taking them out," ClearScore said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.