Strict check will block some shopkeepers

Buy shopkeepers now pay for later (BNPL), the new rules in next July will require to pass strict ability checks.

This means that some shopkeepers will be denied this type of credit and some clicks may be slow to print on something potentially ineffective.

Regulators say it will prevent people from taking too much loan and will be caught by late payment fee.

Nurse Julie Rovbotum told the BBC that it was “easy to fall into a trap” with such borrowings.

He said that having an alternative to your fingers made life easier, but the debt could “easily and quickly mount” so he carefully managed his finance to avoid falling into a spiral.

The BNPL offers the interest-free credit of the shopkeepers, allowing them to buy something immediately, then repaid in 12 or less installments within 12 months or less.

Huge operators such as Clarna and Clearpe have emerged and are introduced as a payment method by many of Britain’s largest retailers.

Some 11 million people in the UK have now used purchases, paid later last year, City Watchdog – Financial Conduct Authority (FCA) – Estimated.

Its survey found that 30% of adults between the ages of 25 to 34 used it at least once from 12 months to May 2024. The most common use was “lifestyle and beauty purchases” and “cure themselves or others”, it was found.

The BNPL is currently irregular which means that lenders do not require FCA approval to operate.

Charity has repeatedly demanded additional security, after increasing number of people in financial troubles.

Vicky Bronzez, the Chief Executive Officer of Stepition Date Charity, described the new proposals as “an important step forward” in bringing the area to suit other types of credit.

“Now buy, later users have the possibility of borrowing to all credit users to cover the required bills, and our research also found that BNPL is now common as using an overdraft among adults of UK,” she said.

Laws have passed in recent times, which means that FCA can now consult its plans to regulate the region – after years of promises from politicians to control the “wild waste” of lending.

The schemes should have an upfront check on the ability, as well as the consumers have the right to complain to the refund, and to complain to the financial Lokpal.

If the payment is remembered, there should also be a clear information about any effect on the right to cancel, fee and credit rating.

In 10 years, regulators estimate that consumers resulted in better consumers £ 1.8BN, while providers’ profits will fall directly due to less transactions than 1.4BN.

But it said that it wanted to give “flexibility” to the lenders how they implemented the new rules, including the ability assessment.

It can see different lenders using different methods to test whether people can cover the repayment.

Alison Walters, Interim Director of Consumer Finance at FCA said: “We are not telling how the firms to do this, because digital trips will be different.

“Credit is not right for everyone. There will be potential consumers who will not be able to reach this product and firms can signpost them for other support such as loan advice.”

Leading providers have said that they are fully supported to regulate the region in the UK, but it should allow companies to innovate even while protecting consumers.

A spokesman from Clarna said: “After five years of creative work with the Treasury, we are entering the house directly to buy, later pay a reality – a big win for the UK consumers.

“We are eager to work on rules with FCA that protect consumers by keeping options and innovation in the center of the UK Credit Market.”

However, proposals come the same week as Chancellor Rachel Reeves said Financial services required low regulationThe FCA said that now buy something, later payment safety will come under the current FCA regulation schemes.

Consultation on FCA plans will run till the end of September.

There will be a temporary regulation rule before the new rules are effective in next July. This means that the firms will need to follow the FCA rules and before they will be able to continue trade before they are fully authorized.