Lord Livermore (Lab)

My Lords, I am very grateful to the noble Baroness for her comments and questions and for her support for these measures which, as she says, build on what the previous Government began. She rightly set out the importance of buy now, pay later products and pointed out the potential downsides, which we absolutely agree on, regarding borrowers getting into trouble and the need to prevent that. She also talked about the need for balance. She is right that the action that we take should not in any way close down an important route for consumers. As I said in my opening remarks, these measures have been welcomed by consumer groups. Although these products can help people manage their finances by spreading the cost of purchases, they can put consumers at risk, particularly from unaffordable lending. The FCA will be able to apply appropriate, proportionate rules on assessing creditworthiness and affordability for buy now, pay later lending, so I am confident that it will not unduly close down these routes. It has been welcomed by the providers and consumer groups. The Government are committed to proportionate regulation. On that point, the noble Baroness went on to talk about the impact on small businesses. Again, they have welcomed this measure to avoid the overly burdensome approach and the regulatory creep she spoke about. That is exactly why protecting small businesses from regulatory overreach was central to our approach. Regulating these products, offered directly by merchants, threatens to capture the simple gym membership example that we talked about. I am happy to give her those assurances on the approach and the way the FCA will approach that. The noble Baroness asked a number of questions about the FCA and the next steps on regulation. Regulation will commence 12 months after this legislation is made. The FCA will consult after the legislation is finalised. The consultation will include the FCA’s proposed conduct rules for regulating buy now, pay later. The FCA will then consider stakeholder feedback and decide whether it needs to amend its proposed approach before making its final rules. Firms will need a period in which to digest and prepare for the final rules before they come into force. The FCA is keen to give industry as much opportunity as possible to prepare its systems and processes before the final rules come into effect. The FCA intends to publish its policy statement and final rules in early 2026. The noble Baroness asked about capacity and my confidence in the FCA. Obviously, that is complete. The FCA is an independent, non-governmental organisation. Its independence is vital to its role. However, it is fully accountable to the Government and Parliament for how it exercises its functions. This accountability is critical to ensuring it advances the objectives given to it by Parliament and is performing optimally. Ministers in the Treasury have a very close working relationship with the FCA. We work together very effectively to solve problems and are able to exchange views frankly. The noble Baroness asked about the second consultation process. Although the consultation is split into two phases, the Government intend to implement the reforms via one legislative vehicle when parliamentary time allows. Once the legislation is in place, the FCA will consult on a policy approach and draft rules for a reformed regime. The noble Baroness also asked about exemptions, which I think I touched on. As I said in my opening remarks, we absolutely have the intention to keep these under review and if further action is required, we will not hesitate to act. I think I have covered all the points that she raised.