‘Buy Now Pay Later’ are set to face increased regulation following a ruling by the Financial Conduct Authority (FCA), which stated it would be easy to build up debts of £1000.
The exponential growth in digital transactions last year was replicated by the use of BNPL services, which increased four fold.
The FCA emphasised that the services are an all too easy way for debt to mount up and would subsequently be regulated by the body, placing a specific focus on the younger demographic only being offered plans they can afford.
Commenting on the issue, Luke Massie, CEO of VibePay, said: “The pressure of keeping up with social media trends combined with the easy access to capital was always going to end badly for the majority of younger consumers. The absence of regulation has resulted in many being influenced by the marketing campaigns of the leading buy now pay later firms, with messaging glamourising credit and not educating on the risks, such as the impact significant debt and poor credit scores will have on their choices later in life.
“We have continued to inform our audience of the risks of buy now pay later and we welcome the news from the FCA to enforce stricter regulations on this sector.”
It comes after a bill to increase regulation on firms such as Klarna and Laybuy was voted down by the UK government.
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’.
Following the decision by the UK Government, the MP for Walthamstow responded on Twitter: “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.”