‘Buy now, pay later’ lenders face government crackdown
SHOPPERS with poor credit histories could be frozen out of “buy now, pay later” schemes as part of a government crackdown on the controversial lending practice.
Lenders would be forced to carry out affordability checks and face tougher advertising rules under proposals laid out by the Government today – but new legislation may not kick in until midway through next year.
It will impact companies such as Klarna and Clearpay, which allow customers to pay for products in instalments rather than entirely upfront.
The rapidly-growing sector, which is particularly popular among younger shoppers, has drawn the attention of regulators with concern such offers could leave people saddled with large amounts of debt.
John Glen, economic secretary to the Treasury, said: “Buy now, pay later can be a helpful way to manage your finances but we need to ensure that people can embrace new products and services with the appropriate protections in place. By holding buy now, pay later to the high standards we expect of other loans and forms of credit, we are protecting consumers and fostering the safe growth of this innovative market in the UK.”
The Treasury said it needs until later this year to publish draft legislation due to the “complexity” of the sector.
The new rules will be extended to other types of interest-free credit on purchase such as dental work and furniture. The Treasury said “the risks posed are similar and consumers should receive consistent protections from similar products”.
A new online tax checking tool was launched by the Treasury today to help people see how much take home pay they can expect ahead of changes to the National Insurance threshold. On July 6, the point at which people start paying NI will rise to £12,570. Workers will be able to go online, input their salary and see how much they could save.
In addition, a new Financial Support and Benefits Checker Tool will also help people find the government support they are eligible for.