The Treasury has come under fire from a Tory peer today after more delays to the rollout of buy-now pay-later regulation, amid concerns fintechs have been left in limbo and shoppers are landing themselves in unmanageable piles of debt.
Buy-now pay-later (BNPL) firms like Klarna, Clearpay and Laybuy, which allow shoppers to defer and split up payments, remain unregulated in the UK despite the government-commissioned Woolard review warning of the need for “urgent” rules nearly two years ago.
Ministers announced an initial framework for regulation in June and City minister Andrew Griffith said the government would open a consultation on draft legislation by the end of 2022. However, the Treasury is yet to provide an update.
The stretched timelines drew the ire of top Tory peer Chris Holmes, co-chair of the parliamentary group for fintech, who told City A.M. business confidence in the UK was at risk.
“I think it’s important that we get on with the regulation. Both the industry and consumer groups are on the same page. Regulation is positive for consumers and raises the standards across the industry too,” he said.
“We need to make sure the UK is an attractive place to do business as this indecision is causing unnecessary uncertainty,” he added.
The delays to tailored rules for the sector have also irked both fintech groups and debt campaigners who are pushing for faster movement from the Treasury.
“We’re now coming up to two years since the Woolard Review but BNPL remains unregulated,” Luke Kosky, fintech lead at lobby group Codec told City A.M.
“Delays mean more confusion for firms and consumers. Robust and proportionate regulation must be a priority of this government,” he added.
Debt campaigners at StepChange, who have repeatedly sounded the alarm over BNPL, said the government’s commitment to regulate the sector by the middle of this year was “welcome and cannot come soon enough” but to meet this timetable the “consultation will need to be forthcoming soon”.
A BNPL industry insider similarly told City A.M. the sector had welcomed Woolard’s recommendations to regulate the industry, but “there hasn’t been any update for over six months”.
A spokesperson for the Treasury said that it would “consult on draft legislation in the coming weeks” and was looking to hold the sector to “the high standards we expect of other loans and forms of credit.”
FCA officials are waiting for the Treasury to legislate to bring the sector into its remit before they are able to consult and draw up rules.
An FCA spokesperson told City A.M. it has been “consistently calling for a change to the law to bring buy-now-pay-later products under our regulation”.
“As soon as government and parliament decides on the scope of that legislative change, we will immediately consult on the rules these firms need to follow,” they added.
In the meantime, the watchdog has leant on its existing arsenal to keep BNPL firms in check. City A.M. revealed last year that the watchdog had written to a number of firms threatening jail time for bosses if they did not fall in line with stringent financial promotion rules.