Buy now, pay later regulation 'has NOT been canned', Chancellor tells Martin Lewis – but regulation won't be 'heavy-handed'
Buy now, pay later (BNPL) regulation has not been shelved, Chancellor Jeremy Hunt claimed in an interview with MoneySavingExpert.com founder Martin Lewis this week. However, the Government is being careful not to be too "heavy-handed" in its approach to regulating the industry, Mr Hunt said.
The interview was broadcast during the latest episode of ITV's The Martin Lewis Money Show Live on Tuesday 9 January. You can watch it in full on ITVX (the relevant section starts at around 33 minutes in).
What the Chancellor said about buy now, pay later in his interview with Martin Lewis
Martin asked Mr Hunt whether the Government had "canned" the plans to regulate BNPL – "the fastest growing debt in the country".
"No", replied Mr Hunt. But he added that the Government was being careful not to be too "heavy-handed" with the new rules. The Chancellor went on to describe BNPL as a "lifeline" for people during the cost of living crisis.
When Martin pointed out that regulation wouldn't stop people from using BNPL, but would protect them when things go wrong, Mr Hunt said: "We want to make sure we do it in a proportionate way that doesn't stop people who responsibly use those techniques to afford something they wouldn't otherwise be able to."
However, it's unclear what this specifically means for the way the industry will be regulated.
What Martin Lewis and Jeremy Hunt said – the full transcript...
Martin Lewis: "Buy now, pay later – we had regulation set up, it was all going to happen. Again, we've had another total silence. Have you canned regulating the fastest growing debt in the country?"
Jeremy Hunt: "No, but we are being really careful, in a cost of living crisis, not to be heavy-handed. That's why we're taking our time over it – 14 million people use buy now, pay later every six months."
Martin: "Which is why we need to regulate it now, Chancellor."
Mr Hunt: "Yes, but for the majority of people, it is a lifeline. It means they can afford something they wouldn't otherwise be able to afford."
Martin: "Regulation doesn't stop it, regulation protects them when things go wrong. A third of people get buy now, pay later and are then having to get other debts to pay it off. It needs regulation."
Mr Hunt: "Well, we just want to make sure we do it in a proportionate way that doesn't stop people who responsibly use those techniques to afford something that wouldn't otherwise be able to."
Martin and MSE have long called for urgent regulation of the BNPL sector
Martin warned in 2020 that the "explosive" market for BNPL would need to be regulated to protect consumers from building up unmanageable debt. The Government obliged, announcing in February 2021 that regulation would be implemented.
The original Government plans would require users to face affordability checks before borrowing from the likes of Clearpay and Klarna. It would mean that borrowers with complaints would be able to take their cases to the Financial Ombudsman Service, and that they would benefit from powerful Section 75 rights for purchases between £100 and £30,000 as they do for credit cards now.
But after telling the regulator to prepare, drafting the laws and consulting on them – the regulation STILL isn't in place.
In November, MSE renewed its calls alongside charity Citizens Advice and consumer group Which? after rumours that the Treasury was going to ditch the plans entirely.
BNPL users were over four times as likely to have missed a payment of a bill or credit commitment in three of the six months to January 2023 (27% vs. 6%), according to the Financial Conduct Authority. Regulating the industry would safeguard purchases and provide protection from unsustainable borrowing.