Plans to shelve buy-now pay-later rules ‘incredibly concerning’, says Which?
A top campaign group has sounded the alarm today after it emerged that the government is preparing to shelve plans to clampdown on the buy-now pay-later (BNPL) sector.
The Treasury has been pushing ahead with plans to bring BNPL products offered by firms like Klarna and Clearpay under the remit of the Financial Conduct Authority amid fears that shoppers are landing themselves in mounting piles of unregulated debt.
Plans to bring the sector under regulation were first tabled by the Treasury in 2021 and were formalised last year by the Treasury, with regulation intended for late 2023.
However, ministers are now reportedly planning to kick the plans into the long grass due to concerns over the accessibility of low interest products and fears that some of the biggest players in the market will quit the UK, Sky News reported.
The report has reignited fears that shoppers will be left unprotected when using the payment tools.
“It is incredibly concerning to hear the Treasury is considering shelving its plans to regulate the Buy Now Pay Later (BNPL) industry – especially as more people may be using credit options to make ends meet during the cost of living crisis,” said Rocio Concha, Which? director of policy and advocacy said.
“BNPL options appear at many online checkouts, but our research shows that many users do not realise they are taking on debt or consider the prospect of missing payments, so the government’s new rules and legislation proposed earlier this year were seen as an important step.”
The government “must not delay plans to introduce changes to the industry” and ensure that consumers are given “stronger safeguards to protect them and warn about the risks of using BNPL schemes”, she added.
Under the Treasury’s initial proposals, Rules around creditworthiness were set to be applied to the sector, requiring BNPL firms to ramp up checks on consumers and issue credit that is “genuinely affordable”.
Consumers would also be allowed to take disputes over credit to the Financial Ombudsman Service under the scope of the planned rules.
Powers were due to be granted to the FCA by the end of this year but regulators have leant on their existing arsenal to keep BNPL firms in check as they waited for firmer rules.
City PM revealed last year that the watchdog had written to a number of firms threatening jail time for bosses if they did not fall in line with stringent financial promotion rules.
The Treasury declined to comment.