Crackdown on ‘buy now, pay later’ companies as Labour pushes ahead with plans to regulate sector
Buy now, pay later companies such as Klarna and Clearpay are bracing for tough new rules as Labour pushes ahead with plans to regulate the sector.
The Treasury Department is expected to announce reforms late next month, three years after the rule changes were first considered in 2021.
Since then, Britons have spent almost £55 billion through buy-now-pay-later (BNPL) lenders.
Crackdown: The Treasury is expected to announce reforms to the buy-now-pay-later industry by the end of next month – three years after the rule changes were first considered in 2021
BNPL is an unregulated form of credit that allows consumers to defer payments or pay for products in installments.
Critics accuse providers of pushing users into a downward spiral of debt because affordability checks are not strict enough.
But the platforms welcome Labour’s push for new rules.
It comes as Swedish giant Klarna, the UK’s largest BNPL provider, continues with long-standing plans to float on the New York Stock Exchange, where it is reportedly targeting a valuation of £15.5bn.
Ministers are in talks with lenders and consumer rights groups and aim to make an announcement on the sector within the first 100 days of the Labour government.
Before the election, Labour indicated it wanted BNPL companies to carry out affordability checks on customers and keep more accurate records of their credit records.
It was suggested that customers should be given clearer information when signing up and that they should be able to complain to the Financial Ombudsman Service if something goes wrong.
Plans by the previous government to introduce regulations were stalled over fears that lenders would leave the UK and turn to countries with looser rules.
Simon Trevethick, of the debt charity StepChange, welcomed the new government’s “clear commitment to regulation”.
‘BNPL is often aggressively marketed at the checkout,’ he said. ‘Affordability controls are also inconsistent and a uniform approach is required. The industry is ready, it just needs political will.’
According to figures from Adobe, UK consumers will have spent around £9.4 billion through BNPL services in 2024, up 3.5 percent year-on-year.
The purchases accounted for 15.6 percent of the total amount spent by online shoppers in the year to July.
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