Urgent demand from MPs to regulate Buy Now Pay Later firms
Posted on in Business News , Cycles News , Political News
T
he call to regulate BNPL firms like Klarna, Laybuy and Clearpay is now supported by 70 MPs, with many arguing that the FCA review is too lengthy and could leave consumers drowning in debt.
The growing distrust for popular Buy Now Pay Later (BNPL) providers has frequently been making the headlines for well over a year now. The issues that these popular provides cause has been bought to attention of debt charities, financial campaigners and even MPs.
The BNPL industry has seen huge growth in recent years, with the likes of Klarna and Affirm becoming multi-billion dollar giants. However, multiple investigations have revealed a developing pattern reflecting that as these trendy lenders continue to grow in popularity, as does the amount of debt racked up by poorly informed consumers.
According to research by Credit Karma, a quarter of Brits used BNPL services to fund Christmas shopping, setting up a £2.3 billion bill. A recent study by Capco reveals that more than half of 18-34 year olds using it have missed a payment and nearly two thirds say it is making them spend more, potentially increasing their chances of getting into debt.
This mounting problem was bought to the attention of Labour MP Stella Creasy, who wrote to both the Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA) to raise the issue of BNPL. Stella Creasy previously campaigned against pay day loaners Wonga in 2014, which led to the FCA, the financial services industry watchdog, investigating Wonga and forcing it to write off 330,000 loans worth £220m and compensate 45,000 other customers.
"next Wonga waiting to happen"
Creasy is not alone in her concerns, the issue was discussed in the House of Commons last week, where a bill to regulate BNPL firms like Klarna, Laybuy and Clearpay was supported by 70 MPs. During the discussion Creasy referred to the entry of a host of BNPL firms as the "next Wonga waiting to happen".
The FCA is conducting a review into BNPL firms, but some MPs worry that the lengthy process could push regulation out by another 18 months, leaving consumers drowning in debt during an economic downturn.
"1 in 10 are left struggling to pay rent"
Creasy recently posted on twitter headlined "Why we need to stop the Klarnage", which went on to encourage people to discuss the growing issue with their MP, "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."