Martin Lewis, founder of Money Saving Expert, has hit back at 'buy now, pay later schemes', criticising the 'painfully slow' process of regulating the schemes.
A promise of cracking down on tougher rules aren't likely to be enforced until 2024, but credit debt blew up during the pandemic for people using firms such as Klarna, Laybuy and Clearpay.
The buy now, pay later scheme allows shoppers to delay paying for products and pay it off in instalments.
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However, there have been growing concerns among regulators, politicians and consumer groups over just how easy it is for people to enter into the scheme and be left with sizeable debt, as Lancs Live reports.
Citizens Advice pointed out that customers are "piling borrowing on top of borrowing, and sinking into ever more desperate situations."
To give customers more protection, in February 2021, the government announced that the Financial Conduct Authority would have authority to police the sector.
It is expected all firms would have to conduct a proper affordability checks before lending and make sure customers are treated with fairness if they are struggling to pay back.
However, the government still need to publish a consultation on draft legislation and the Treasury said that will likely happen "towards the end of the year", with a secondary legislation before parliament mid-2023.
It is now believed that the government thinks early 2024 is more realistic than 2023. It is indicated by the Treasury that the timetable for reforms was due to the "complexity" of the regulations.
In response to the announcement, Martin Lewis said: "Buy now, pay later regulation is desperately needed, so my pleasure that it’s finally to happen is tempered by frustration at how long it is taking.
"It’s now nearly two years since we raised the alarm about BNPL’s explosive growth and called for urgent regulation to ensure proper checks are in place, and that people can go to the Financial Ombudsman when there are problems. Yet those protections still won’t be in place for the financially bleak winter coming.
"Buy now, pay later is often insidiously marketed as a simple payment option, or worse, a lifestyle choice. It’s not. It’s a debt, with all the dangers of debts. It perverts purchasing decision-making, leaving many in a continuous loop of owe-owe-owe. Firms make money from it because people transact more via BNPL than they would otherwise.
"Debt shouldn’t be something you slip into, it must be an informed, active, conscientious choice. While in some cases BNPL can be a legitimately cheap way to spread the cost, amidst a cost of living crisis, people should always first ask themselves: ‘if I can’t afford to pay for it now, how will I afford to pay for it next month?"
Gary Rohloff, co-founder and managing director of BNPL firm Laybuy, said it was supportive of the government’s approach and would work closely with the FCA on the next steps.
He said: “We have always been in favour of a proportionate model of regulation, one that reflects the low risk of BNPL, supports small e-commerce businesses and sets high standards across the industry."
