Buy Now Pay Later Schemes Under Review
The (BNPL) schemes are encouraging young people to buy more than they can afford and Labour MP, Stella Creasy, is calling for a temporary suspension. Fashion retailers, including ASOS, Boohoo and H&M, encourage easy access to credit with BNPL options displayed on their websites at the point of purchase.
Creasy is calling on retailers to take action now, in order to prevent a debt crisis for young people down the line. Creasy is also holding the Government to account, asking that they seek to regulate BNPL lenders. BNPL lenders operating the UK including Zip, Clearpay and Klarna with PayPal also operating a Pay-In-3 option.
Ms Creasy’s calls have not found traction, with the Government voting down her cross-party amendment to the Financial Services Bill. If it had been passed, it would have led to regulations being brought in within months. While Minsters have expressed that they are looking at taking action in the future, they will only do so after the publication of a review of regulation of the unsecured credit market.
Ms Creasy has also called on retailers who offer BNPL schemes to remove them from their online stores. Many retailers promote the buy now pay later schemes in a prominent position beside their product listings. Ms Creasy is undeterred and vows to hold the retailers to account until the Government is prepared to step in and regulate the BNPL market. She expresses her deep concern for younger consumers who are coming to rely on the BNPL option, with research showing that these schemes are now used 35% more often than they were before the start of the Coronavirus pandemic. Ms Creasy is also worried by companies who offer discounts to consumers who opt for BNPL.
Both retailers and BNPL lenders have argued that they are offering a service in response to the needs of their audience, with Boohoo stating that it helps their customers to better manage their finances. BNPL lender Clearpay has come out in support of regulation, where appropriate, that offers consumers protection, but it also backs the need for consumer flexibility. Swedish BNPL brand, Klarna, claims that it charges neither interest or fees on its most popular products.
Debt charity, StepChange, however have reported an increase in those who are looking for help, advice and support with BNPL debt.