Patrick O'Donnell
Guest Reporter
Martin Lewis has confirmed new legislation to "regulate" Buy Now Pay Later schemes following a meeting with Chancellor Rachel Reeves this afternoon.
The money saving expert spoke with Reeves ahead of her Budget on October 30, which is expected to include cuts to spending and tax hikes.
In his phone call with the Chancellor, Lewis was informed of upcoming changes to the payment scheme which reportedly "have proper affordability rules".
Under Buy Now Pay Later, customers are able to make regular smaller payments instead of paying in full for purchases for up to 12 months.
However, this is an interest bearing option which places households at greater risk of falling into debt as a result.
Under new rules outlined by the Treasury, millions of Buy-Now, Pay-Later users key protections are offered by other forms of credit. Companies will be made to ensure ensure lending is affordable to stop Britons falling into debt.
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On X, Lewis said: "Buy Now, Pay Later is now ubiquitous at online checkouts, so the fact it’s never been regulated is a travesty I and others have long campaigned on.
"The last Chancellor promised to regulate, then the tumbleweed rolled as he went silent, so I am delighted the new Government has quickly restarted the process.
"BNPL can be useful, allowing those who need to spread payments for a budgeted, necessary purchase like a plumber to do it interest-free.
"Yet it’s been sold as a lifestyle choice, not a debt, and pushed for instinct buys or even takeaways. Too many are in trouble with multiple BNPL repayments, leading to debt-chasing and credit file damage."
"Regulation will mean firms must be overt that it’s a debt, have proper affordability rules, and will crucially let people go to the ombudsman if things go wrong."
The host of The Martin Lewis Money Show Live warned that consumers should be cautious about this announcement as changes will not be made law for another couple of years.
The financial expert explained: "Yet it’s [the legislation] not coming in until 2026, so people should still be very wary until then."
As part of a consultation, Labour will give firms, such as Klarna and Clearpay, another opportunity to take part in forming the law.
Under new rules, FIRMS will need to provide clear, simple and accessible information about loan agreements in advance so that shoppers can make fully informed decisions and understand the risks associated with late repayments.
Consumer Credit Act information disclosure rules will be disapplied so that the FCA can consult on bespoke rules that ensure users are given this information in a way that is tailored to the online setting in which Buy-Now, Pay-Later products are generally used.
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BNPL users will be given bolstered rights if issues arise with products they purchase, making it quicker and easier to get redress.
This will include applying Section 75 of the Consumer Credit Act, which allows consumers to claim refunds from their lender, and access to the Financial Ombudsman Service to make complaints.
This six-week consultation is set to close on November 29. Secondary legislation will be brought forward in front of Parliament early next year to allow the regulation to create a bespoke regime for the Buy Now Pay Later going forward. Any changes are expected to add to the regulator's existing Consumer Duty rules.
Economic Secretary to the Treasury Tulip Siddiq said: "Millions of people use Buy-Now, Pay-Later to manage their finances, but the previous government’s dither and delay left them unprotected.
"We promised to take action before the election and now we are delivering. Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow."
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