FCA's new rules on Buy Now Pay Later come into force

FCA's new rules on Buy Now Pay Later come into force

The UK Financial Conduct Authority's new rules in the Buy Now Pay Later (BNPL) market come into force today, a move which the regulator believes will save consumers around £40-60 million a year in interest payments.

The rules, announced in June, prevent firms from charging backdated interest at the end of promotional offer periods.

Classic BNPL offers tend to provide a promotional period, typically up to 12 months, during which consumers do not have to make payments and are not charged interest. However, if the consumer does not repay the entire amount within this period, then interest will usually be charged from the date of purchase.

The market has been invigorated in recent times by the arrival of a host of new tech-driven companies that enable merchants to stagger payments at the point-of-sale.

"We absolutely welcome these rules coming into force," Gary, Rohloff, co-founder of BNPL tech provider Laybuy, tells Finextra.

"The FCA are ensuring that consumers are protected from rapacious regimes on things that have already been paid.

"Coming from a retail background, this isn't something that I'd want my customers falling foul of."

Laybuy is a purchase platform from New Zealand that enables merchants to offer consumers the option to pay for items over a period of six weeks. 

Not charging interest, but instead taking a small commission from merchants who use the service, Laybuy may look to appeal to retailers concerned that the new rules will take a bite out of their profit margin on BNPL programmes.

"The FCA's rules don't equate to what we offer because we don't charge interest anyway," Rohloff adds. "We're always mindful of it, but we're not impacted by it in the same way."

Laybuy, which arrived in the UK in March, counts Pink Boutique, Alexa Chung and Footasylym among its client, and has today added Toni & Guy to this list. 

As November wears on, retailers will enter full festive mode as they prepare for Black Friday and the Christmas rush.

Sales have however been muted in recent years, and this year there is the added wrinkle of General Election and Brexit-related uncertainty for retailers to worry about. 

Companies will likely look to offer added incentives in the fierce competition for consumers' pounds, such as the flexiblity of a BNPL programme.

It was, for example, announced last week that M&S is offering a BNPL offer on online purchases over £30 in conjunction with Clearpay.

Jamie Crawley, Reporter, Finextra

Comments: (1)

John Brawley
John Brawley - Elavon - Glasgow 12 November, 2019, 11:581 like 1 like

It will be interesting to see how the traditional big players in the BNPL sapce, like big electrical and  furniture retailers are going to react to the new FCA rules.