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Buy Now, Pay Later Regulatory Changes:
What Dentists Need To Know
Posted Monday 4 December 2023
Overview
- The UK government plans to introduce new rules to protect consumers and regulate buy now pay later finance (BNPL) in 2024 or 2025.
- BNPL includes any finance which has no interest, fees or charges over a period of 12 months or less, in less than 12 instalments.
- There are a number of proposed changes. They include the introduction of creditworthiness and affordability checks for BNPL providers and regulation of consumer credit promotions.
- For practices, it’s essential to choose the right BNPL provider, who is well placed to adhere to the new rules.
Why are regulatory changes being proposed for buy now pay later finance in dentistry?
Currently, offering patients finance which has no interest, fees or charges over a period of 12 or less months and in 12 or less instalments is classed as unregulated finance and does not require FCA authorisation. This is also known as buy now pay later (BNPL) finance.
While this type of financing can be extremely helpful in allowing patients to afford treatments, it is still a form of debt and the fastest growing in the UK.
Consumer groups, debt advice providers and the FCA have all called on the government to introduce new rules to protect consumers and regulate BNPL finance. The FCA recently published research showing that frequent users of BNPL are more likely to be in financial difficulty and there are concerns over unsuitable borrowing under the mounting pressure of the cost of living crisis.
The Treasury’s consultation of the draft legislation closed in April 2023 and final rules are expected in 2024 or 2025.
What changes are expected and how will they affect dental practices?
Creditworthiness and affordability checks will be introduced
This is to ensure that patients can afford to make the repayments on any finance they take out to pay for their dental treatment. Many BNPL providers already conduct credit checks however, it’s expected that they will need to make these more robust, whilst still providing a quick and easy customer loan application experience.
Advertising and promoting BNPL finance to customers will be subject to financial promotions rules and will have to be pre-approved by an FCA authorised business
This is to ensure that patients are clear that they are using BNPL services and are aware of the implications of doing so. Any financial promotions* that dental practices release must be pre-approved and compliant. BNPL providers will have to supply dental practices with pre-approved promotional materials.
Patients will be able to take a complaint to the Financial Ombudsman Service if they are not satisfied with the BNPL providers resolution
This aligns with how complaints are treated for other forms of regulated consumer credit, offers patients greater protection and enhanced potential for redress in the event the customer is not satisfied with how the BNPL provider handles the complaint.
BNPL providers will have to report BNPL loans to credit reference agencies
Currently there is no obligation to report patients BNPL products to credit reference agencies (CRA). This means that the patient’s credit file does not always accurately represent their credit position. BNPL providers will need to ensure they have systems and processes in place to report in a clear, consistent and timely manner to CRAs. If BNPL providers do not get this right, it is likely to be a driver for patient complaints.
BNPL providers will have to consider their treatment of patients who may become financially vulnerable
Providers must ensure that they have adequate systems, controls and processes in place to identify patients who may be in financial difficulty and treat them with forbearance and due consideration.
Providers must ensure “good outcomes” for patients where they take out a BNPL product. This includes making sure that the products provided to patients are fully understood, meet their needs, provide fair value and help patients to achieve their financial objectives.
*Financial promotions include any advertisement of the provision of consumer credit agreement, using any form of media. For example, social media, flyers, website, emails, SMS, posters, ads.
So, what does all this mean for your Practice?
It’s clear that the regulation of BNPL credit providers is good news for patients! It offers them additional protections, safeguards and seeks to ensure that they receive good outcomes when using this type of finance to pay for dental treatments.
The main takeaway for your Practice is that it is essential to choose the right BNPL partner. With the new regulations expected to be in place in by late 2024 or 2025, Practices should only introduce patients to a BNPL credit provider who is well-placed to adhere to the new rules.
The new rules will also require Practices to improve their advertising methods, to ensure consumers are not only aware that they are using BNPL services, but of the implications.
A better way to offer dental finance
Finance is a powerful way to improve case acceptance. But why stop there? Practi transforms patient decision-making and adds valuable patient insights to the mix to supercharge conversion.
Fairness is part of our DNA
We're part of the Simplyhealth family, that’s why we’ve chosen a BNPL credit provider known for their transparent, fair and responsible lending decisions. Each payment plan is customised to every patient, thanks to their rigorous credit approval process.
Take the hassle out of finance
By partnering with us, you can wave goodbye to the complexities of independent FCA authorisation, along with all the admin, expense and risk. We handle it all for you. Not only that, but we also provide pre-approved marketing materials that will keep you protected and compliant with the new rules.