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(Sharecast News) - The UK financial regulator has said it wants the 'buy now pay later' market to "thrive", as it announced a wave of new protections for borrowers on Wednesday, including affordability checks and a compensation scheme.
The Financial Conduct Authority acknowledged that BNPL - otherwise known as deferred payment credit - provides an "important source of credit for many", but said there are currently no protections in plans for those who use it repeatedly and may not be able to afford it.
The new regulations announced this week, which will be imposed from mid-July, should provide "appropriate support for consumers", the regulator said in a statement.
BNPL providers will now be subject to the Consumer Duty, meaning consumers will benefit from "clear, upfront details about their agreement", including what happens if they miss a payment.
Lenders must also now carry out "proportionate" affordability checks to ensure customers can repay what they borrow, and offer support to those in financial difficulties, such as directing them to free debt advice.
Meanwhile, if something goes wrong, consumers will now be able to complain to the Financial Ombudsman Service, the FCA said.
"Crucially, no one should be lent to if they're unable to repay, because that could worsen their financial situation," said FCA deputy chief executive Sarah Pritchard.
"Now Parliament has given us the powers, we're putting in place proportionate protections for the 11 million people who use it."
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