The Buy Now Pay Later (BNPL) market will be subject to government regulation by the end of October, according to industry insiders.
BNPL products have grown increasingly popular in the UK, with the industry estimated to have financed £3 billion in customer transactions across the country.
The companies offering BNPL services have so far operated with no regulation.
However, professional services firm BDO have revealed that government proposals are expected to be announced next week.
According to the new FCA regulation, it intends to protect BNPL consumers from harm or exploitation by credit firms.
BDO anticipates that the regulation will include affordability assessments for product applications, making sure vulnerable customers are treated fairly.
BNPL lenders will also have to comply with the provision of forbearance, offering the customer some leniency with pausing or reducing repayments.
“When a sector of consumer finance grows as fast and as far as BNPL it is almost inevitable that the FCA is going to have to regulate it,” BDO financial services partner Richard Barnwell told CityAM.
“Part of the concern about this sector is that it has gained so much traction amongst a younger demographic, who might typically have less experience of dealing with financial products.
“They are also a demographic that can be vulnerable to personal insolvency caused by taking on too much consumer credit.
“What the Treasury will need to balance is the fair treatment of borrowers with allowing this fast growth sector to deliver what consumers want.”