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Labour calls for BNPL regulation amid Treasury hesitation

Labour BNPL
Image credit: Przemek Klos / Shutterstock

The Labour Party is calling for the immediate regulation of buy now pay later (BNPL) products amid reports of a government backtrack.

In a letter to Economic Secretary to the Treasury Andrew Griffith seen by UKTN, Labour MP and Shadow City Minister Tulip Siddiq criticised the government for not enacting regulation of the loan product.

The government first laid out a plan to tighten restrictions on BNPL services in February. However, it was reported last month that the Treasury was considering shelving these plans over fears that it would negatively affect the UK’s position in the market.

Siddiq called out the Treasury for failing to deliver on the regulation it had previously promised as a response to the Woolard Review from the Financial Conduct Authority (FCA).

“We’re now over two and half years on from the Woolard Review, and this promise has yet to be delivered,” Siddiq wrote.

“The government’s constant dithering and delay has put the British public directly at risk, especially as the Conservative’s cost-of-living crisis has deepened.”

A Treasury spokesperson told UKTN: “No decisions have been made as we are reviewing the responses to our recent consultation and will report back in due course.”

Labour: Government ‘looking other way’ on BNPL

Recent data has shown that the use of BNPL services in the UK has increased alongside the cost of living crises.

BNPL splits the cost of purchases into instalments, which reduces the upfront cost for consumers but creates debt.

“While many BNPL providers offer useful payment and low, or no, cost credit options for consumers, this Conservative government has chosen to look the other way while the most vulnerable users have been left at risk from some of the unethical companies that operate in the sector,” the MP for Hampstead and Kilburn added.

FCA boss Nikhil Rathi also criticised the reported backtrack, claiming the concern that firms would exit the UK market were unfounded.

The originally planned regulation would treat BNPL more like other loan products. This included a requirement for firms to conduct more in-depth affordability checks on users and report use of the service to credit agencies.

Some BNPL providers, including London headquartered Zilch, have publicly welcomed the regulation of the sector in the past.