The Treasury is consulting about regulation as many providers currently fall outside the existing watchdog regime. Lenders such as Klarna and Payl8r allow payment to be spread, typically interest-free.
Lenders such as Klarna and Payl8r allow payment to be spread, typically interest-free.
The value of loans being taken out quadrupled last year to £2.7billion and the Government fears that consumers are at risk of falling into debt traps.
It also has concerns about inconsistencies in the way customers in financial difficulty are treated, the lack of a requirement for credit-worthiness checks and borrowers not getting sufficient information.
The Government wants to give BNPL borrowers protection similar to section 75 of the Consumer Credit Act, which makes credit-card lenders jointly responsible if there is a breach of contract or misrepresentation by a retailer or trader.
It also wants BNPL borrowers to have the same safeguards credit cards offer when users fall into difficulty. In its consultation document, it said: “The Government is aware that some BNPL providers do currently provide their own buyer-protection schemes, but is currently of the view that a statutory protection could apply as part of regulation of BNPL, so that it is in line with other regulated credit agreements.”
Matthew Upton at Citizens Advice likened BNPL borrowing to “quicksand – easy to slip into and very difficult to get out of”. He added: “The buy now, pay later sector has grown incredibly quickly and we need consumer protections to keep pace.
“We welcome the Treasury’s commitment to regulate the sector. Now it must be swiftly translated into action.”
Gareth Shaw at Which? said: “There can be no delay in regulating BNPL to ensure that those who use it are properly informed and protected.”
Elsewhere, Barclays reported growth in its revenues and profits thanks to a surge in mergers, takeovers and flotations boosting its investment bank.