The head of UK public policy at Clearpay has said that Australia and New Zealand offer a “useful model” for the regulation of Buy Now, Pay Later (BNPL), as the government closes its consultation for upcoming legislation.

This week Australia recognised BNPL as a distinct financial product, introducing measures like mandatory credit checks for larger purchases.

As of September, consumers in New Zealand using BNPL now receive many of the same protections as borrowers in credit cards or personal loans, with the country's government saying these obligations will be applied proportionately given the nature of the payment option and the lack of interest or credit fees.

“The UK can draw key lessons from these approaches,” Clearpay’s Iana Vidal told FStech. “Its regulations must be proportionate and appropriate, ensuring all BNPL providers are held to the same high standards.”

Clearpay, which was launched in 2019, is the UK subsidiary of Australian FinTech Afterpay.

In October, the UK government published a legislative consultation, which closed on Friday, setting out its plans for regulating the BNPL market.

It said that these plans aim to ensure people using BNPL products receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.

As the consultation was launched, HM Treasury announced that BNPL will come under the regulation of the Financial Conduct Authority (FCA) from 2026.

The final law is expected to be laid in parliament in early 2025, with the FCA finalising the rules the following year.

The announcement follows years of uncertainty about when BNPL regulation would be brought into law.

Under the new law, Consumer Credit Act information disclosure rules will be disapplied so that the FCA can consult on bespoke rules that ensure users are given information in a way that is tailored to the online setting in which BNPL products are generally used.

As part of the move, BNPL users will be given stronger rights if issues arise with products they purchase, making it quicker and easier to get redress.

This will include the application of Section 75 of the Consumer Credit Act, which allows consumers to claim refunds from their lender and access the Financial Ombudsman Service to make complaints.

Speaking about how the new regulation will impact future investment in the UK, Vidal said: "Proportionate BNPL regulation will further strengthen the UK’s position as a global FinTech leader By introducing clear and consistent rules, the government can build trust among consumers and businesses, creating a solid foundation for long-term growth. Other markets, such as Australia and New Zealand, have shown how well-designed regulation can protect consumers while supporting innovation."

She added that balanced regulation will mean that BNPL providers can continue to innovate and "fill the gap" left by traditional credit options.

The new regulation comes after the Woolard Review, which was published in February 2021, identified risks that could give rise to consumer harm in the BNPL market, including the absence of requirements to undertake affordability assessments and the potential to create high levels of debt.

Upcoming legislation will now give the FCA power to set appropriate rules on assessing affordability and creditworthiness, reducing the risk that borrowing is unaffordable.

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