MPs: Bring ‘buy now pay later’ sector into line – pressure on Government amid worries Christmas season could see thousands pushed into debt
- Vote on amendment to the Financial Services and Markets Bill
- Labour front bench expected to back amendment, tabled by Stella Creasy
- Some ministers privately accept that issue needs to be addressed quickly
MPs will ratchet up pressure on the Government to regulate the controversial buy now pay later (BNPL) industry this week amid worries the Christmas season could see thousands of people pushed into debt.
On Wednesday, they will vote on an amendment to the Financial Services and Markets Bill which would require regulations on BNPL to be published within 28 days of it becoming law.
The Labour front bench is expected to back the amendment, tabled by Labour MP Stella Creasy, while sources said several backbench Tory MPs are also predicted to support the measure.
Weak foundations: Some ministers have privately accepted that the issue needs to be addressed quickly as debt charities warn the popularity of BNPL is sky-rocketing
Even some ministers have privately accepted that the issue needs to be addressed quickly as debt charities warn the popularity of BNPL is sky-rocketing due to the cost of living squeeze.
Creasy told the Mail BNPL was now ‘mimicking’ the payday loan industry in that it was trying to encourage consumers to ‘develop a habit’ of using its services in order to make people reliant on credit as well as ‘exploiting’ those facing financial difficulties.
She added that complexity had been ‘used as an excuse to do nothing’ and the Government should at least bring BNPL, which is currently unregulated, into line with the rules for firms providing credit.
Tory MP Paul Maynard has also called for regulation of the sector. He said the ball was now in the court of the Financial Conduct Authority and that he was ‘urging an acceleration’ to bring the sector in line. Worries about the growing popularity of BNPL come amid signs the finances of British households are becoming increasingly strained as energy costs soar and inflation bites.
BNPL allows customers to split the cost of purchases into instalments, often with no interest or charges unless they fail to pay back on time.
Its popularity boomed during the pandemic amid a surge in online shopping, leading to the growth of providers such as Klarna, Stripe and Zilch while tech giants Apple and PayPal have launched their own versions of the services.
Recent figures from credit data group Clearscore found that overdraft usage among UK bank account holders had increased by 7.1 per cent since August last year as spending on essential items jumped by 25 per cent.