Buy Now Pay Later companies like Klarna, Clearpay, Laybuy and Afterpay have boomed during lockdown, with as many as one in four shoppers using their services in the run-up to Christmas and 35% of adults relying more heavily on this type of credit since the pandemic struck last year. More than a quarter of those who have taken advantage of delayed payment schemes in the past year say they could not afford the purchase at the time.
With so many people now using these companies, it is vital that we act before this becomes another Wonga-style scandal that leads to thousands of people being trapped in a dangerous cycle of debt.
That is why today I have signed an amendment to the Financial Services Bill to require the Government to properly regulate the Buy Now Pay Later industry. This amendment is supported by over 70 MPs from across Parliament, as well as Martin Lewis of Money Saving Expert.
Buy Now Pay Later companies allow consumers to spread payments over several weeks and have been growing in popularity during the pandemic as a way to manage to cost of online shopping. Currently, these organisations do not have to abide by Financial Conduct Authority rules due to a regulatory loophole – yet there is growing evidence of the harm their practices are causing.
These companies make it easier to overspend online as the costs appear lower and are spread out over time – yet with furloughing and redundancies growing what seems affordable one month may not be in the next.
That is why I’m joining MPs from every party in calling on the Financial Conduct Authority to step in before it is too late and regulate these firms to protect consumers from racking up unaffordable debt.
I hope the Government will listen to MPs and support this amendment during today’s debate so that we can help protect consumers from financial difficulty.