Buy-now-pay-later firms have come under government scrutiny after it was revealed that use of services like Klarna has tripled during the pandemic, with critics claiming that the system makes it easy to rack up debts.
Young people, especially, are quickly finding themselves in deep waters by using buy-now-pay-later services that offer interest-free payment plans, the UK Government has revealed.
In response, it has said today that the Financial Conduct Authority will take responsibility for imposing tighter curbs on the activities of firms offering the service.
One such measure will see lenders required to carry out affordability checks on customers, and ensure the vulnerable are treated fairly, as many buyers are reportedly already in debt before they make purchases using buy-now-pay-later platforms.
A post on gov.uk revealed that the government will still allow people to take advantage of services like Klarna, but wants to make sure that no one falls foul of the payment method.
John Glen, Economic Secretary to the Treasury, said: “Buy-now-pay-later can be a helpful way to manage your finances but it’s important that consumers are protected as these agreements become more popular.
“By stepping in and regulating, we’re making sure people are treated fairly and only offered agreements they can afford – the same protections you’d expect with other loans.”
This comes after a review of the unsecured credit market by Christopher Woolard recommended the government impose tighter restrictions.