Labour has accused ministers of dragging their feet in regulating the booming “buy now, pay later” sector, claiming that millions of hard-up Britons are at risk of being exploited by unethical operators.
The Treasury promised in February 2021 to “act swiftly” and legislate to regulate the popular products that allow users to defer or divide payments into instalments without any interest, in order to make sure they came with the right protections.
But with the issue still under review following a consultation, shadow City minister Tulip Siddiq has claimed the policy is being “kicked into the long grass” ahead of the general election expected next year.
In a letter to City minister Andrew Griffith, seen by the Financial Times, Siddiq said: “I recognise that many people value BNPL deals, as they can be a useful way to budget and pay for items.
“But the government’s failure to regulate the sector has left millions at risk from bad actors in the market.”
Ministers are grappling with the trade-offs involved in regulating a sector that offers a financial lifeline to many Britons, including the risk that some operators could leave the market if rules are too severe. However, government insiders said Griffith was determined to press ahead with regulation and that the Treasury hoped to respond to the recent consultation in the autumn.
The Treasury said: “Regulation of buy now, pay later products must be proportionate so borrowers are protected, while still being able to access these useful interest-free products.
“No decisions have been made as we are reviewing the responses to our recent consultation and will report back in due course.”
The finance ministry has been delaying policies that might exacerbate the cost of living crisis, including pausing Brexit-related plans on regulation and border controls that risk increasing prices.
While traditionally seen as a tool for discretionary spending, BNPL deals have surged among all age groups in the UK, including older people, who find themselves squeezed by rising living costs and in need of short-term credit.
The products soared in popularity during the pandemic but have come under increasing regulatory scrutiny over the rate of take-up and whether companies adequately assess customers’ ability to afford loans. In 2021, a review commissioned by the Financial Conduct Authority, which does not regulate the products, found that work on BNPL was “very urgent”.
Siddiq said Labour would work “hand-in-hand with industry to properly regulate the BNPL” sector.
The legislative window is quickly closing in this parliament. November 7 will see King Charles set out the government’s last full legislative programme before the next general election.
The FCA found in its latest annual survey of Britons’ finances that 8.8mn adults — 17 per cent — had used deferred payment credit or BNPL deals in the previous 12 months.
Other markets, including Australia, are also looking to rein in the industry. In May, Australian financial services minister Stephen Jones announced that BNPL products would be more strictly regulated as credit products.
Source: Economy - ft.com
