Pressure is mounting on the Treasury to greenlight the next stage of buy-now pay-later regulation as concerns grow over the use of the products in the midst of a cost of living crisis.
Speaking to City A.M. yesterday, former FCA boss Chris Woolard, author of the landmark Woolard review of the BNPL sector, reiterated the need for “urgent” regulation in the space but warned the speed had slowed since January.
“As the review made clear, regulation is urgently needed within the BNPL market” he said.
“The initial Treasury response committing to regulate BNPL was incredibly quick and primary legislation amended.
“While the pace has since slowed, now, post-consultation, it is important that the FCA is granted the necessary powers to create and enforce rules that will protect customers.”
BNPL products have exploded in popularity in the past two years as shoppers looked to spread the costs of purchases across instalments.
But concerns have grown over the unregulated nature of the sector against a backdrop of rising prices, with data this week indicating that nearly one in ten people have now used the products to buy essentials, according to Hargreaves Lansdown.
The Financial Conduct Authority is keen to regulate the sector but has to wait for the results of a Treasury-led consultation – which closed in early January.
A spokesperson for the watchdog told City A.M. this week that the rising cost of living had “underscored the need for buy-now pay-later products to come into regulation.”
“It is vital the law, which sets our remit, adapts as the market innovates,” the spokesperson said.
Swedish-headquartered BNPL giant Klarna told City A.M. yesterday it was acting on the recommendations of the Woolard review as it waited for the Treasury to publish the results.
“Regulation can’t come soon enough to protect consumers as more and more providers enter the space,” Klarna said.
“For our part, we took Chris Woolard’s advice to ‘not wait for regulation’ to heart and have introduced a series of changes to better support consumers.”
Labour MP Stella Creasy, a vocal critic of BNPL firms, told City A.M. it was “absolutely indefensible” that the government is yet to regulate the sector.
“These companies are benefiting from the financial struggles so many face and there is mounting evidence of the levels of unsustainable personal debt people are getting into as a result, yet still consumers don’t have basic protections such as access to an ombudsman if they are mis sold such credit,” she said.
“With firms from gambling companies to takeaways now using this kind of credit, the need for urgent action is clear and further delay is only making the problem worse.”
A Treasury spokesperson said: “Our consultation on policy proposals closed on 6 January and we are now reviewing responses and intends to publish a consultation response that outlines next steps in the coming weeks.”