MILLIONS of Buy Now, Pay Later customers could lose access to the payment method when new regulation comes into force in months.
One in four adults used Buy Now, Pay Later (BNPL) last year to spread the cost of purchases and manage short-term expenses without paying interest.
But rules coming into force in July will mean that firms will have to check that customers can afford to make repayments before they can use BNPL.
As a result, millions of people could be barred from using these services, warns Fair4All Finance.
It is hoped that the new rules will stop customers from falling into debt when they miss a repayment.
But Fair4All Finance warns that these checks could create a “cliff edge” and exclude the most financially vulnerable people who currently use BNPL responsibly.
Fair4All Finance estimates that between ten and 30% of people who currently use BNPL could lose access once the regulation comes into force.
Meanwhile, nearly half of people who are likely to be rejected have not missed a BNPL payment.
As a result, customers could be left with fewer small-sum, interest-free credit at a time when there are already fewer borrowing options.
This could push customers towards more expensive or unregulated forms of credit, including high-cost credit or borrowing from friends and family.
Niall Alexander, credit and consumer markets lead at Fair4All Finance, said that regulation of BNPL is necessary and welcome but it must be proportionate.
He added: “Regulators should focus on reducing harm among frequent users, while preserving access for those who use BNPL safely.”
The FCA said it wants people to be able to access credit they can afford.
It added: “We’ve proposed sensible checks that’d help borrowers avoid unmanageable debt.”
