žž

Labour Party Pressures UK Government For BNPL Rules

November 7, 2023
Back
The opposition Labour Party has called on the UK government to implement a regulatory framework for buy now, pay later (BNPL) products.

The opposition Labour Party has called on the UK government to implement a regulatory framework for buy now, pay later (BNPL) products.



In a letter  on Monday (November 7), Labour’s shadow treasury minister Tulip Siddiq has set out proposals to regulate BNPL products, criticising the current Conservative government for inaction. 



In the letter, the politician points out that the ruling party committed to regulating the payment method in February 2021, "before potential detriment is able to occur" to the British public.



“We're now 33 months on from this broken promise, and the government has still done nothing to regulate the sector,” Siddiq, who is Labour’s spokesperson for financial services, says.  



“This means that the millions of people using BNPL products have no payment protection or recourse to the Financial Ombudsman Service, and it has left consumers at risk from exploitation by bad actors in the market and of getting trapped in debt,” the member of parliament warns. 



Siddiq claims her calls for BNPL regulation are not without support from relevant stakeholders, stating that she met last week with major BNPL providers, trade body Innovate Finance and consumer groups to discuss a plan for how the sector can be regulated under a future Labour government. 



“Every single organisation present made clear that there is no excuse to further delay regulation,” she writes.



Labour sets out five regulatory proposals



Siddiq has set out five principles for regulating BNPL, suggesting that if the Conservative party do not take action, then Labour will commit to regulation if it wins a majority and forms a government after elections due to take place next year. 



In the proposals, Siddiq firstly references the Financial Conduct Authority’s (FCA) new Consumer Duty regulation, saying that BNPL products “must deliver good outcomes for consumers, by ensuring customers have access to clear information”. 



“The complicated and prescriptive disclosure requirement under the Consumer Credit Act (CCA) isn't working. We need guidance that is simple, clear and understandable,” Siddiq says. 



Siddiq also says that, in line with the Consumer Duty, vulnerable consumers who may be at risk of unaffordable debt must be protected. 



This includes “timely, appropriate” affordability assessments (that in turn do not unfairly penalise consumers), interventions to support vulnerable consumers, such as tracking their aggregate credit across different providers and better credit information sharing across the market.



The shadow treasury minister also calls for consumers to have more protection if something goes wrong, saying that BNPL users must be able to take complaints to the Financial Ombudsman Service. 



Further, Siddiq has said that regulation must be proportionate to support innovation in the sector, to ensure that consumers' are able to access BNPL products. 



“Consumers must continue to benefit from choice in the credit market,” she said, adding that regulation must work in the specific online transaction environment of BNPL and be proportionate to risk. 



Lastly, the London MP has stressed that regulation must be introduced urgently.



“Consumers can't afford to wait years for reform of the Consumer Credit Act (CCA). We need regulation urgently to ensure consumers are protected and the sector has the certainty it needs,” she writes. 



Siddiq continues that the FCA must be empowered to create a regime that works for consumers and the sector. 



“I hope the Conservatives will support this call for urgent regulation. If not, then it's time for this exhausted and failing government to step aside so that Labour can act and govern in the national interest.”



Regulatory focus on BNPL 



Siddiq’s intervention comes a week after the FCA said that it had secured agreements from PayPal and QVC to change their BNPL contracts. 



This builds on work in February 2022, whereby key BNPL firms Klarna, Openpay, Clearpay and Laybuy voluntarily agreed to change the terms of their contracts. 



The UK government is still due to introduce BNPL regulation. However, rumours that circulated during the summer suggested that Treasury ministers had backed away from the proposal. 



Separately on Monday, backbench Labour MP Stella Creasy, who has been campaigning for the product to be regulated,  on X (formerly Twitter) that “BNPL companies are legal loan sharks making millions exploiting the lack of regulation of this form of credit by this government” after news broke that Klarna has returned to profitability. 



Creasy said that it is “a massive scandal” if the issue is not addressed in the King’s Speech, held on November 7. 




     



     

Our premium content is available to users of our services.

To view articles, please Log-in to your account, or sign up today for full access:

Opt in to hear about webinars, events, industry and product news

To find out more about žž, contact us today
No items found.
No items found.