Start 'buy now pay later' crackdown as soon as possible, MP says

Firms such as Swedish giant Klarna are set to face extra scrutiny by regulators after the Financial Conduct Authority (FCA) said the interest-free loans provided were "a really easy way to fall into problem debt."

BNPL firms offer services through thousands of retailers, enabling people to split payments without paying any interest. They have surged in popularity and in 2020 were used by five million people in the UK for total sales of £2.7 billion.

However, concerns have been raised over rising debt among customers, with the FCA review saying that one in 10 people who use them already had other debts.

Ministers were today urged to act on the FCA recommendations "as soon as possible".

Shadow City Minister Pat McFadden, the Wolverhampton South East MP, said: "The buy now pay later sector has exploded in use in recent years and up until now it has not been properly regulated.

"We've been calling for regulation for some time because we fear that without it a lot of people could be getting into debt that they can't handle.

"I very much welcome the report from the FCA, saying that the sector should be properly regulated. I hope the Government acts on this as soon as possible."

John Glen, Economic Secretary to the Treasury, said: "By stepping in and regulating, we're making sure people are treated fairly and only offered agreements they can afford – the same protections you'd expect with other loans."

Under the plans, BNPL firms will need to undertake affordability checks on customers. They would also need to put support measures in place for customers who are vulnerable or struggling with repayments.

Klarna, which is Europe's biggest privately owned financial technology company, has backed calls for regulation.