City watchdog to crack down on ‘buy now pay later’ firms
The City watchdog is preparing to move in on so-called buy now pay later firms such as Klarna following a review of the unsecured credit market.
The Financial Conduct Authority (FCA) will this morning publish a report by interim chief executive Chris Woolard recommending that the sector be brought under the regulator’s remit, Sky News reported.
It comes four months after the FCA board commissioned Woolard to review the sector amid concerns shoppers were being encouraged to buy products they could not afford.
The review will call for the FCA’s powers to be extended to cover companies such as Klarna and Clearpay, which enable post-purchase payments.
The firms have enjoyed rapid growth thanks to their popularity among millennial audiences shopping with online retailers such as Asos, Topshop and JD Sports.
Swedish platform Klarna, which now has more than 1m monthly active users, secured a valuation of $11bn (£8.5bn) following its latest funding round in September, making it Europe’s most valuable private fintech.
While they do not charge interest or fees, buy now pay later firms refer non-payment of accounts to debt collection agencies. They have faced criticisms of allowing young people to spend beyond their means and run up considerable debts.
The Treasury is said to have shown support for the recommendations in Woolard’s report.
The FCA declined to comment.