Martin Lewis has hit out at the “painfully slow” process of regulating the buy now, pay later (BNPL) sector.
The MoneySavingExpert said families face a “bleak winter” as the new measures to protect people from taking on debt they can’t afford won’t come in until “likely 2024”.
Under the new regulation, BNPL lenders will be required to carry out affordability checks and make sure their advertisements are clear and not misleading.
Companies offering the product will need to be approved by the Financial Conduct Authority (FCA) and borrowers will be able to take a complaint to the Financial Ombudsman Service (FOS).
A consultation on draft legislation will be published near the end of this year, with an aim to lay secondary legislation by mid 2023.
The FCA will then consult on its rules for the sector, the Treasury said in an update this week.
Have you had trouble using buy now, pay later? Let us know: mirror.money.saving@mirror.co.uk
Commenting on the BNPL update, Martin said: "The Treasury is today announcing plans to regulate buy now, pay later (BNPL) products after a consultation, yet that won't be brought forward to mid-2023, and not in place until likely 2024.
“That is painfully, and far too, slow…”
He continued: “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.”
As the name suggests, BNPL plans allow you to buy items and pay for them later - usually within 30 days without interest or any hidden charges.
But critics say the lack of "hard" credit checks mean people run the risk of borrowing money that they can’t actually afford.
In February, the FCA said some firms had agreed to change the terms in their customer contracts to make them fairer and easier to understand.
Economic Secretary to the Treasury John Glen 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."
