.svg)
The UK Treasury is reportedly considering shelving its buy now, pay later (BNPL) plans due to fears that firms could exit the country over the new rules.
HM Treasury officials have reportedly been told during industry talks that major firms in the BNPL space could leave the UK if the legislation passes into law.
The revelation that the government could be set for a u-turn has triggered backlash among UK politicians and campaigners, after it was reported by UK media outlet Sky News.
“Eight million people in this country are struggling to pay a Buy Now, Pay Later bill because they are borrowing to fund inflation and the cost of living crisis,” said Labour MP Stella Creasy, speaking in the House of Commons.
“The government agreed in 2020 that they would legislate on it, we’ve been waiting since then for regulations and yet now there are press reports suggesting that the whole thing is going to be scrapped and rethought,” she said.
Creasy continued to warn that the move could leave millions of people “at harm of legal loan sharks”.
Meanwhile, consumer advocate and media personality Martin Lewis tweeted: “Please (sic) DON’T let this be true”.
Lewis expressed surprise that the Treasury would backtrack on regulating “the UK’s fastest growing form of debt, with billions lent”.
“Yes, BNPL used right can help people borrow interest-free to spread necessary costs, but it's still a debt,” he tweeted.
Klarna also said in a blog post that it is in favour of a regulatory regime and said the reports are “news to us”.
“We’re going to stick our necks out here and say we believe BNPL will be regulated in the UK. The arguments in favour are too strong,” blogged Klarna. “We hope it happens quickly.”
The BNPL giant did, however, say that it is important that regulation is introduced wisely.
“There are many examples of poor regulation akin to a tick box exercise which leave consumers unprotected and established banks entrenched”.
The UK government issued draft legislation to regulate BNPL providers in March this year.
The regime, which was consulted on, would require BNPL providers to be authorised by the Financial Conduct Authority (FCA) and subject to the regulator's rules on creditworthiness assessments and financial promotions.
New regulation could also mean that creditors would be liable for merchant breaches and misrepresentations, as is the case with traditional credit agreements.
Consumer body Which? reacted with disappointment to the reports as well.
“It is incredibly concerning to hear the Treasury is considering shelving its plans to regulate the BNPL industry, especially as more people may be using credit options to make ends meet during the cost of living crisis,” said Rocio Concha, Which? director of policy and advocacy.
According to Concha, BNPL options appear at many online checkouts, but the campaign group’s research shows that many users do not realise they are taking on debt or consider the prospect of missing payments.
“So the government’s new rules and legislation proposed earlier this year were seen as an important step.”
Concha warned that the government must not delay plans to introduce changes to the industry and ensure that consumers are given stronger safeguards to protect them and warn about the risks of using BNPL schemes.
“This needs to include greater marketing transparency and information about the risks of missed payments and credit checks before consumers are cleared to use BNPL providers.”
