Buy Now Pay Later (BNPL) firms have welcomed impending regulation of the sector as the Government prepares to clamp down following a consultation which closed yesterday.
Klarna and Clearpay both claimed the time was right for regulation and confirmed they had submitted recommendations on new rules to the Treasury.
Alex Marsh, Head of Klarna UK, told City AM in a statement: “The HMT consultation is an important step forward in regulating BNPL, which we have long called for.
“At Klarna we have not waited for regulation; we already operate to the highest standards, including making it absolutely clear at the checkout and in our Ts and Cs that we offer interest free credit products along with upfront repayment plans and the consequences of missed payments.”
Marsh said that rules were “badly needed” as banks begin to enter the BNPL space, “bringing with them dirty tricks and double-digit interest rates.”
Clearpay said: “We believe that bespoke regulation of BNPL is needed to provide proportionate consumer protection. To ensure clarity and consistency for consumers, retailers and BNPL providers, a definition of BNPL must be developed within legislation.”
The firm said it had recommended that a new definition of BNPL be created in legislation which defined it as a “credit agreement made under deferred payment credit arrangements”.
It also advised that a new set of bespoke rules was created that ensured consumer protections and outcomes while allowing the sector to grow and innovate.
The consultation was opened following a review of the BNPL sector last year by former Financial Conduct Authority (FCA) boss Chris Woolard which found that change was “urgently needed” to protect consumers.
New rules are likely to come into force later this year or in early 2023.