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In brief

On 21 October 2021 HM Treasury (HMT) published its much-anticipated consultation on the regulation of buy-now-pay-later (BNPL) products. The consultation arrives nearly seven months after HMT confirmed that it would formally consult on bringing BNPL products into the regulatory perimeter “as a matter of priority”, following the Woolard Review’s recommendation in that BNPL products should be brought within the regulatory perimeter “[a]s a matter of urgency”.

In summary, the consultation sets out policy options to achieve a proportionate approach to regulation of BNPL, focusing on those elements of lending practice that are most closely linked to the potential consumer detriment as identified by the Woolard Review. HMT proposes:

  • that BNPL lending be brought within the regulatory perimeter – although there are various options as to how widely to draw the perimeter.
  • to disapply most of the Consumer Credit Act (CCA) formalities on disclosures, form and content to BNPL agreements, relying instead on the disclosure requirements set out in FCA’s rules on consumer credit (CONC) (with any amendments the FCA might make to account for the specifics of the product). 
  • to apply some of the deterrent mechanisms in the CCA, including section 75 CCA (which enables customers to bring claims against lenders as well as merchants where goods have been mis-sold) as well as provisions on improper execution, and on customers in financial difficulties. Some CCA amendments may be required to bring small BNPL agreements within scope. 
  • to apply the FCA’s rules on creditworthiness and customers in financial difficulties. 
  • to include access to the Financial Ombudsman Service (FOS). 

For the merchant community, the consultation proposes that the BNPL regulatory framework include an exemption so that the broking of BNPL credit by a merchant would not lead to a requirement that the merchant is subject to regulation as a credit broker. However, the consultation has not settled on the precise scope of the to-be-regulated BNPL market. For lenders, it will be important to understand the regulatory position of merchants including, for example, how this may affect financial promotions and whether lenders might need to be involved in approving merchants’ promotions of BNPL products if merchants do not ultimately require their own licence or authorisation as a credit broker.

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Mark Simpson is a partner in the Financial Services & Regulatory Group in the London office where he practices in the areas of financial regulation, financial crime, and regulatory investigations. He is a member of the Firm's EMEA Financial Services & Insurance Steering Committee, as well as its Global Funds and FinTech Groups. He participates actively in industry bodies including the Alternative Investment Managers Association. He has authored a number of articles and other publications, most notably acting as a general editor of and contributor to the International Guide to Money Laundering Law and Practice, and A Practitioner's Guide to the Law and Regulation of Financial Crime.


Kimberly Everitt is a Knowledge Lawyer in Baker McKenzie London office.


Ben Thatcher is an Associate in Baker McKenzie London office.

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