U.K. Government to Regulate Buy Now, Pay Later Plans
- The UK government is set to announce regulations to oversee 'buy now, pay later' firms, such as Klarna.
- This move addresses concerns over consumer debt associated with these payment options.
- The upcoming announcement aims to provide better protection for consumers in the financial marketplace.
The U.K. Treasury has announced plans to introduce regulations for the "buy now, pay later" (BNPL) sector, following a series of delays attributed to political instability and industry lobbying. A spokesperson confirmed that the Labour government will soon unveil updated regulatory measures, emphasizing the need to protect consumers and provide clarity for the industry. This announcement aligns with previous statements made by Tulip Siddiq, the new economic secretary to the Treasury. BNPL schemes allow consumers to purchase items and defer payments, but concerns have arisen regarding their sustainability amid rising interest rates. Experts suggest that the Financial Conduct Authority (FCA) may implement regulations within the next two years. A policy paper released last year indicated that the government is considering applying existing regulations for traditional lenders to BNPL products, which would enhance information disclosure and oversight. Industry representatives have expressed support for the forthcoming regulations. Clearpay, a prominent BNPL provider, welcomed the government's commitment to customer protection and innovation in consumer credit. The company advocates for regulations that establish high industry standards while ensuring consumer safety. Critics, including Philip Belamant, CEO of Zilch, argue that the current lack of regulation allows many lenders to operate without impacting consumers' credit scores, leaving them vulnerable. He stressed that regulation is essential for safeguarding consumers and ensuring responsible lending practices in the largely unregulated BNPL market, which is a growing concern not only in the U.K. but globally.