Market News

(Bloomberg) -- The UK is moving ahead with long-awaited plans to regulate “buy now, pay later” lenders.

Providers such as Klarna, Clearpay and PayPal Holdings Inc. will be required to give consumers key information about their loans and issue credit that is affordable, while users will have the right to take complaints to the Financial Ombudsman Service, according to a Treasury statement Monday. 

“People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important,” Andrew Griffith, the economic secretary, said in the statement. 

The rules will go through a consultation before the Financial Conduct Authority gets the power to oversee the sector. The move comes two years after the Woolard review said changes were “urgently needed” to regulate the BNPL industry, noting that many consumers didn’t view the interest-free service as a form of credit.

Use of BNPL products, which allow users to split the cost of a purchase into three or four payments, ballooned during the pandemic. The Treasury said its proposed rules would protect 10 million customers, while the global market is expected to grow to $600 billion by 2026, according to research firm Global Data. 

However, valuations of many BNPL providers have plunged in the past year as concerns grew about their ability to profit with interest rates rising and with regulation looming in the UK and around the world.