Gov votes down Buy Now, Pay Later regulation

The government has voted down a bill to regulate Buy Now, Pay Later (BNPL) companies like Klarna and Clearpay.

Labour MP for Walthamstow Stella Creasy, who describes BNPL as the “next Wonga,” originally put forward the motion to amend the financial services bill.

According to the Labour MP, a quarter of BNPL customers have had to ask family or friends to pay back money, while one in ten are struggling to pay rent.

Creasy said that ministers are waiting for a report by the FCA on BNPL.

“If we leave it longer, waiting and waiting as we did with the payday lenders – then it’s our constituents who will suffer,” she said. “Even the companies themselves – just like turkeys who think Christmas is a good idea – say that regulation should happen.”

Last month money expert Martin Lewis urged the government to regulate BNPL companies.

At a virtual House of Commons Select Committee meeting, Lewis said that these schemes were “absolutely the fastest growing form of credit in the country.”

“My issue is that, just like with payday loans, it will be too late. It is unregulated, without controls both in product design and communications. When people have a problem – and often it actually works pretty well – there is no ombudsman you can go to, because it is unregulated. I would call for maximum speed to move this into the regulatory environment,” he said in December.

Lewis added:“Advertising is done by influencers on Instagram, where they are pushing the feelgood hashtag Klarna. That is fundamentally inappropriate for a credit product.”

Klarna’s direct to consumer app, which enables users to shop at any store or brand online with instalment payment options, now has more than 12 million monthly active users worldwide, with 55,000 daily downloads.

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