Britain on Tuesday set out draft legislation to regulate “buy now pay later” (BNPL) credit, saying the sector posed potential harm to consumers without thorough affordability checks.
BNPL companies are largely unregulated and typically offer on-the-spot interest-free short-term loans that spread payments for retail goods like clothing.
The sector nearly quadrupled during the pandemic in 2020 to 2.7 billion pounds ($3.28 billion).
With Britain facing a cost of living crisis, consumer groups worry cash-strapped people are getting into debt by using BNPL to buy food or pay energy bills.
The finance ministry launched a public consultation on Tuesday on legislation to regulate BNPL, giving the Financial Conduct Authority (FCA) powers to authorise operators and their activities.
The move had already been flagged for late 2022.
“People should be able to access affordable credit, but with clear protections in place,” Financial Services Minister Andrew Griffith said in a statement from the finance ministry.