The UK government is taking action to address the issue of excessive borrowing through buy-now-pay-later (BNPL) services. New regulations will require lenders to conduct more thorough affordability checks on borrowers and provide clearer information to ensure that they only issue credit that is genuinely affordable. The Financial Conduct Authority will also have the authority to crack down on non-compliant firms and withdraw their authorization to operate in the UK.
To protect consumers, the new regulations will give them the option to raise complaints with the Financial Ombudsman Service if they are dissatisfied with BNPL services. City minister Andrew Griffith stressed the importance of providing consumers with affordable credit while also implementing necessary protections. The government aims to introduce legislation in the middle of this year and is currently gathering input from industry stakeholders on the proposed regulations.
A recent study conducted by personal finance specialist NerdWallet revealed that 15% of UK consumers in debt owe money to BNPL providers such as Klarna or Clearpay. Alarmingly, 47% of these consumers believe they will need to take on additional debt while still repaying their existing debt. The study found that Millennials, aged 25-44, have a particularly high demand for BNPL services, with over 22% admitting to being in debt to short-term credit providers. Gen Z follows closely behind, with 21% of individuals in this age group also being in debt to such providers. However, both Millennials and Gen Z are even more likely to be in debt due to credit card usage or loans.
The study also uncovered a gender disparity, with women being almost twice as likely as men to owe money through BNPL providers. Around 20% of women stated that they owe money to these services, compared to only 11% of men. These findings emphasize the growing issue of debt accumulation among younger generations and the urgent need for regulations to address it.
Overall, the forthcoming legislation is a significant step towards ensuring responsible lending practices in the BNPL sector. By implementing stricter affordability checks and consumer protections, the government aims to safeguard individuals from falling into unsustainable debt. The findings of the NerdWallet study further highlight the need for financial education and support to help individuals manage their finances effectively and avoid the pitfalls of excessive borrowing.
For more information on the study conducted by NerdWallet, please visit their website: [a href=”https://www.nerdwallet.com/”]NerdWallet[/a].
To learn more about responsible borrowing and personal finance management, you can visit this comprehensive guide: [a href=”https://www.moneyadviceservice.org.uk/en/categories/borrowing”]Money Advice Service – Borrowing[/a].
