Prior to Brexit, EEA-based firms were able to operate in the UK without direct FCA authorisation.
The Temporary Permissions Regime, which allowed EEA firms to continue operating in the UK, is about to end, having run for three years. The FCA says it is currently assessing the last of the firms in the regime for full authorisation. These include some firms that offer unregulated Buy Now Pay Later (BNPL) products alongside regulated ones. Parliament has yet to decide whether BNPL products will be regulated by the FCA in future.
When a firm is authorised for regulated lending, the FCA will have assessed its approach to ensuring that interest-bearing loans are affordable for consumers and that they exercise appropriate forbearance when consumers are in financial difficulty. Amongst other things, firms are required to set out their approach to dealing with vulnerable customers and how their products comply with the Consumer Duty.
If a consumer is not happy with any product or service they receive, they can complain to the firm. If this does not resolve the issue, they can refer their complaint to the Financial Ombudsman.
While BNPL products can provide a useful way to spread the cost of a purchase for some people, it's important that consumers are aware that many BNPL products remain unregulated. Consumers need to be aware that even if a firm’s other products or services are regulated by the FCA, it is not currently required to ensure that exempt BNPL products meet FCA rules such as checking whether customers can afford to repay their loans.
BNPL customers have fewer rights and protections. For example, they cannot bring a complaint to the Financial Ombudsman Service if something goes wrong.
Links: https://www.fca.org.uk/news/news-stories/unregulated-bnpl-firms-becoming-authorised