Buy-now-pay-later firms such as Klarna and Clearpay are braced for tough new rules as Labour pushes ahead with plans to regulate the industry.
The Treasury is set to announce reforms by the end of next month – three years after rule changes were first considered in 2021.
Britons have spent nearly £55billion through the buy-now- pay-later lenders (BNPL) since then.
Crackdown: The Treasury is set to announce reforms to the buy-now-pay-later industry by the end of next month – three years after rule changes were first considered in 2021
BNPL is an unregulated form of credit that allows consumers to defer payments or pay for products in instalments.
Critics blame providers for trapping users in a spiral of debt as affordability checks are not tough enough.
But platforms have welcomed Labour’s commitment to new rules.
It comes as Swedish giant Klarna, the biggest BNPL provider in the UK, continues with long-standing plans to list in New York, where it is reportedly targeting a £15.5billion valuation.
Ministers are in talks with lenders and consumer rights groups and aim to make an announcement on the sector within Labour’s first 100 days of Government.
Before the election, Labour said it wanted BNPL firms to do affordability checks on customers and track their credit records more closely.
It indicated that customers should be given clearer information on signing up and be able to complain to the Financial Ombudsman Service when something goes wrong.
Plans by the previous government to regulate stalled amid fears that lenders would quit the UK for countries with more relaxed rules.
Simon Trevethick, at debt charity StepChange, welcomed a ‘clear commitment from the new Government to regulate’.
‘BNPL is often marketed aggressively at the point of checkout,’ he said. ‘Affordability checks are also inconsistent and a uniform approach is required. The sector is ready, it just needs the political will.’
Some £9.4billion has been spent by British consumers through BNPL services in 2024 – an increase of 3.5 per cent from a year earlier, according to figures by Adobe.
The purchases made up 15.6 per cent of the total amount spent by online shoppers in the year to the end of July.
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