Extract of the Introduction

Determining the risks of products outside the regulatory perimeter – the scope of regulated products, to decide whether, when, or how to regulate them is a key challenge for policymakers. New product innovations can emerge (e.g. cryptocurrency) that do not neatly fit into the legal framework used when regulations were formulated. In addition, products that are purposefully excluded from historical regulation (e.g. 0% interest finance for retail goods) may grow in prevalence or experience changes in their features, such that it changes their risks to consumers and the net economic benefits of consumer protection regulation.

A prominent, current, global example of this regulatory challenge is the ‘buy now, pay later’ (BNPL) market: a FinTech credit option offered by retailers, typically via a third-party, at the point-of-sale enabling shoppers to pay for goods or services in instalments at a zero percent interest rate and without fees (subject to making payments on time). BNPL is largely exempt from most consumer credit regulations in the UK and US and, as a result of its rapid growth 2019 – 2021 (Berg et al., 2021; Financial Conduct Authority, 2021), the UK government, UK and US consumer financial regulators are considering whether and how to regulate such products.