A bill to increase regulation on ‘Buy Now Pay Later’ firms such as Klarna and Laybuy has been voted down by the UK government as the sector continues to experience exponential growth.
It comes at a time when consumer affordability has taken on heightened importance, as global economies look to minimise the impacts caused by the pandemic. Furthermore, the introduction of government-mandated lockdowns has dramatically shifted the way in which consumers engage with commerce, with more shoppers taking a digital approach.
The motion to amend the financial services bill was put forward by Labour MP Stella Creasy, who was keen to underline the scale of the situation, describing BNPL firms as the ‘next Wonga waiting to happen’.
Commenting on Twitter, the MP for Walthamstow responded to the decision: “The government voted down our call to regulate BNPL companies – A quarter of their customers have had to ask family or friends to pay back money, 1 in 10 are left struggling to pay rent. Ask your MP if they missed this chance to stop the next wonga and voted yes or no to NC7.”
Pat McFadden, Labour MP for Wolverhampton South East, also reacted with disappointment, underlining the importance of innovation within regulation: “Labour supported the amendment from @stellacreasy to regulate buy now pay later companies. Regulation has to adapt to new innovations and use of these companies has exploded in the past year. The Government voted it down.”
The campaign to increase regulation on the firms is being spearheaded by a cross-parliamentary group of MPs, with Creasy leading the way. The Walthamstow MP has affirmed the need for efficient action on the implementation of new regulations, with fears that the FCA’s review will take an extensive period of time.
Expert Analysis: It’s hard to dispute the claims that the sector needs a regulatory review, the climate that has allowed the sector to thrive simply heightens the notion that regulation needs to be flexible.