Stirling MP Alyn Smith has co-signed a new clause to draft legislation that would see Buy Now Pay Later companies have to face the same regulations as other credit companies.
Buy Now Pay Later companies offer consumers the ability to spread payments for goods over a number of weeks or months. Instead of charging interest, they charge retailers a service fee with the promise that consumers will spend more using their service.
Research by Money.co.uk found that a fifth of shoppers in the UK have spent more than they can afford, with many admitting that schemes such as BNPL was an opportunity to purchase now and “worry about it later”.
Which? has found that 24% of BNPL customers spent more than they planned to because BNPL was available at the checkout.
These companies are not subject to the same rules as other creditors because they do not charge interest. However, there is growing evidence of the damaging impact they’re having on people. Creditor Klarna has reported a 43% in sales over the course of the pandemic.
A cross-party group of MPs have introduced New Clause 7 to the Financial Services Bill, currently being considered in the Commons. This would subject BNPL companies to the same Financial Conduct Authority regulations and rules as other creditors.
Alyn Smith MP said:
‘The evidence is there that these companies are often having a detrimental impact on people, essentially enticing consumers to purchase outwith their spending power.
‘The pandemic has put many people into financial difficulty, yet without fail these companies are there to advertise their Buy Now Pay Later services – encouraging a dangerous culture of ‘worry later’ when it comes to paying for the goods we’ve purchased.
‘Shops offer these services in store and it’s difficult to find a website that doesn’t enable you to pay for your goods at a later date when you reach the pay section.
‘That’s why I am happy to add my name to this New Clause, as these companies should be held responsible for their conduct in the way any other creditor is.
‘Many people suffered at the hands of the scandalous payday loan sharks, and I am determined to do everything I can to help prevent people falling victim to creditors in the same way again.‘
