The UK will introduce a series of stricter rules for buy-now, pay-later lenders from next year, a move that will bring the regulation of their offerings in line with other credit products.
Legislation bringing the BNPL industry under regulation will be laid before Parliament on Monday, according to a Treasury statement. Under the rules, lenders such as Klarna and Clearpay will be required to check shoppers’ affordability before offering loans, while borrowers will get faster access to refunds and the right to complain to the Financial Ombudsman.
The new rules “will protect shoppers from debt traps,” Emma Reynolds, economic secretary to the Treasury, said in the statement, which said the new rules would come into effect from next year.
The move comes after years of reviews and discussions by the previous Tory government about how fast-growing firms like Klarna, Block Inc.’s Clearpay, PayPal Holdings Inc., and Zilch Technology Ltd. provide consumer credit products.