Politics

Buy now pay later customers face waiting over a YEAR for same protection as credit cards and loans

SHOPPERS who use buy now, pay later face waiting more than a year for protections that already apply to credit cards and loans.

A clampdown on BNPL lending was first announced in February and the government has now launched a consultation on what those rules will look like.

GettyBNPL use has rocketed in recent years[/caption]

But that could take some time to become law and leaves shoppers without anyone to complain to if something goes wrong in the meantime.

The consultation will seek feedback with responses due by January 6, 2022.

The government will then review these and consider next steps, but there is no timeline set for any new rules to come into force.

Labour MP Stella Creasy who has campaigned for stricter rules has warned that the wait puts Brits at risk.

She said: “In delaying BNPL regulation to 2022, the government has given these legal loan sharks an early Christmas present – a cash strapped public desperate for ways to make ends meet and no protection from exploitation.

“We face a cost of living crisis – it’s never been more important to warn consumers about the risks when borrowing with these companies.

“Economic recovery cannot be built on more personal debt or else our constituents will be paying the price for many years to come.”

The government has been asked for comment.

Klarna and other providers like Clearpay and Laybuy have been criticised for leading people into debt too easily.

Putting off payment means that shoppers can quickly rack up debts from several smaller purchases that becomes unmanageable.

Shoppers also can’t complain to the Financial Ombudsman if something goes wrong, or if they have been treated unfairly.

That will change when BNPL schemes come under the regulation of the financial watchdog.

But that won’t happen until new rules are decided and come into force.

Martin Lewis also called for rules to come in sooner.

He said: “Regulation is something I have long called for and it’s good to finally have proposals form the government.

“Yet it really needs to pick up the pace, taking so long to do this has given these firms free rein to continue, unregulated, this Christmas.

Klarna said the launch of the consultation is a “welcome step forward, setting out plans for proportionate regulation that’s in the interest of consumers and encourages innovation”.

The BNPL provider has 90 million users worldwide and is used by 250,00 shops including high street and online-only stores like Shein, Asos, Debenhams and Pretty Little Thing.

Klarna boss Sebastian Siemiatkowski said: “At Klarna we continuously set the standard for the sector. However, there are still bad products out there, so we are pleased that regulation is now clearly under way.

The company earlier this week announced that it will offer a “pay now” option and a raft of changes, like making it clearer at online checkouts that BNPL is a form of credit.

Debt charity StepChange said it welcomed the government’s “promise to regulate the BNPL market, and recognise that BNPL is credit, which has the potential to cause harm without adequate consumer protections”.

Peter Tutton, head of policy, research and public affairs at the charity, said: “Where there are some important choices to be made – such as how widely the definition of BNPL should be drawn, and what the regulatory position of retailers should be – we would like to see the protection of consumers being the first and guiding principle of the final framework.

“We hope the introduction of regulation can be implemented at pace, given the rapid rise of BNPL.”

The use of buy now, pay later products nearly quadrupled in 2020 and is now at £2.7billion, with five million shoppers using them since the start of the coronavirus pandemic, according to the regulator.

Reality stars and Instagram celebs have been slammed for plugging the schemes to their young followers on social media, without outlining the risks.

Parents have also been warned not to use the service to purchase Christmas presents over fears they wouldn’t be unable to repay the costs.