A Tory MP has become the latest politician to call for the Government to accelerate plans to regulate the buy now, pay later (BNPL) industry amid mounting concerns it could trigger a new debt crisis.
Anthony Browne, a member of the Commons Treasury committee, backed an amendment to the Financial Services and Markets Bill which will require the Government to publish regulations on BNPL within 28 days of it becoming law.
Speaking in Parliament on Wednesday, Browne, who was previously involved in the regulation of payday loans, said BNPL was ‘another gap’ in the rules that needed to be addressed.
Concerns: South Cambridgeshire MP Anthony Browne (pictured) has thrown his support behind an amendment to the Financial Services and Markets Bill
While he acknowledged the Financial Conduct Authority had powers to deal with the sector, Browne highlighted frustration that ‘the Government keep saying that they will deal with it but have not done so’.
The intervention reflects a growing cross-party effort to take action on the payday loan industry as debt charities warn people are using the service in increasing numbers over Christmas as the cost of living crisis begins to bite.
BNPL allows customers to split the cost of purchases into instalments, often with no interest or charges unless they fail to pay back on time.
It is popular with younger shoppers and in sectors such as clothing and fast fashion.
BNPL includes major players such as Klarna and Clearpay and has been widely adopted by retailers including the luxury department store Harrods and even by the food delivery app Deliveroo.
Apple and Paypal have also launched BNPL options. But scrutiny has been growing amid mounting concerns that BNPL allows customers to unknowingly build up debt, setting up nasty surprises if they fall behind on payments.
A particular worry is that young people are falling into debt through the schemes, with data from money management app Hyperjar showing one in four millennials and one in five people from Gen Z said their biggest debt was due to using BNPL products.
Meanwhile, research from Citizens Advice showed 42 per cent of those using BNPL are borrowing money just to be able to pay back their commitments.
Mat Megens, boss of fintech firm Hyperjar, said the research showed ‘emotional “quick hit” spending’ was helping push millions of people into debt and that it wouldn’t be long before defaults ‘drastically increase’.
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