BUY now, pay later schemes are to be regulated by the financial watchdog to stop millions of shoppers from plunging into debt.
The Financial Conduct Authority said that bringing the sector under stricter rules was a “matter of urgency”.
Buy now, pay later schemes are to be regulated
Many high-street stores offer the service, including Marks & Spencer, H&M, Uniqlo, River Island and H Samuel, as well as online shops such as Asos.
The schemes, such as Klarna, Clearpay and Laybuy, let customers pay for their shopping in monthly instalments to spread the cost.
But if you don’t, can’t or forget to make all of the repayments within three months, your debts are referred to a collection agency.
The use of buy now, pay later products nearly quadrupled in 2020 and is now at £2.7 billion.
Around five million people have used these products since the beginning of the coronavirus pandemic, according to the regulator.
In the Woolard review, it found the emergence and expansion of unregulated buy now, pay later products gives consumers a significant alternative to more expensive credit.
But this also comes with significant potential for consumer harm.
For example, more than one in 10 customers of a major bank using buy now, pay later were already in arrears.
Regulation would protect people who use buy now, pay later products and make the market sustainable.
More to follow…
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