Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps her Department is taking to ensure that the Financial Conduct Authority is able to deliver final rules for Buy Now, Pay Later regulation that are proportionate to the product.

Regulating the Buy-Now, Pay-Later (BNPL) sector is a government priority. On 19 May, the government introduced legislation to bring BNPL products into regulation. Our legislative approach will disapply the elements of the consumer credit regulatory regime that were originally designed for interest-bearing loans. This will enable the Financial Conduct Authority (FCA) to create a proportionate information disclosure regime tailored specifically to BNPL products.

At this stage, the government considers that BNPL agreements provided directly by merchants should remain exempt from regulation. Including merchant-provided BNPL in the regime would disproportionately impact small businesses offering low-risk agreements such as gym memberships and instalment plans for invoices.

Consumers using merchant-provided BNPL will remain protected by wider consumer protection laws, including strict rules on advertising and financial promotions; and the Consumer Protection from Unfair Trading Regulations, which prohibit unfair commercial practices such as misleading consumers.

The government has not seen evidence that merchants are seeking to offer BNPL agreements on a scale similar to third-party lenders. However, my officials and I will continue to monitor the merchant-provided BNPL market closely, working with the FCA and industry. If we see clear evidence of significant market expansion or large-scale consumer harm, we will intervene swiftly to address these risks.