MARTIN Lewis has urged the government to act on a major form of borrowing ahead of delivering its Autumn Statement.
It comes after reports have suggested that the Treasury might ditch plans to regulate the buy now, pay later (BNPL) sector entirely.
Martin Lewis has argued that this would leave consumers without vital safeguards on purchases and protection from unsustainable borrowing.
The founder of MoneySavingExpert.com took to X (formerly Twitter) and wrote: "Dear government, please don't be yankers.
"Today I've teamed up with WhichUK and CitizensAdvice to plead with the government not to shelve its planned buy now pay later regulation."
In collaboration with Which? and Citizens Advice, Martin Lewis is calling on the government to urgently regulate the industry.
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He said in a statement: "The Government hasn't said it's doing a u-turn, but it's hard not to hear the screech of the handbrakes and the yank of the steering wheel.
"I desperately hope the Government won't be yankers though, this regulation is needed and needed soon.
"BNPL, used right, can be a decent way to spread the cost of planned purchases.
"Yet too often people sign up without realising it is a debt, what happens if they can't pay, or take it on when it's unaffordable.
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"Regulation was so close we could taste it – the Ts just needed crossing, and the Is dotted.
"Yet now we're facing another Christmas, amidst a cost of living crisis, when people under financial pressure are tempted to borrow, and to spend, by this ubiquitous form of debt-payment.
"The industry says the credit laws are imperfect. They're right. They're imperfect for all other debts too – but they're far better than nothing.
"And BNPL is a debt – it needs controls and regulation. Crucially, that'd ensure it's promoted correctly and would give people a legal right to go to the Ombudsman when it goes wrong.
"I'd welcome better rules, but they take time, so let's get the current regulations in place, then all work together to make them better."
Millions of shoppers now use buy now, pay later services.
Unlike traditional borrowing, such as credit cards, BNPL is interest-free.
But it does have risks, as many providers are unregulated, which means shoppers do not get the same level of protection as with other forms of credit.
Klarna, Clearpay and Laybuy are the main providers. Klarna lets shoppers pay for items in full up to 30 days later, or split it into three interest-free instalments.
Clearpay customers can pay in four interest-free instalments over six weeks, and Laybuy lets its customers spread the cost over six weekly payments.
Unlike when borrowing through a credit card customers using BNPL usually only go through a "soft" credit check that leaves no footprint on your credit file so other providers won’t see if you've borrowed money this way.
That’s why it is easy to amass debts with different firms.
Even though BNPL is advertised as interest-free, if you miss payments you could still be charged late fees. Your debts can also be passed on to a collection agency.
Even though these firms aren't regulated, some including Klarna, tell credit reference agencies about late payments.
Shoppers also miss out on major consumer rights protections that come with traditional credit.
Plans to regulate the industry were first announced in February 2021.
The proposed changes aim to reduce the risk of financial harm for around 10million customers but rumours suggest any regulation has been pushed back yet again.
It's been discussed that new regulation could give the Financial Conduct Authority the power to force firms to make extra affordability checks.
It's also hoped that customers will get the right to complain to the Financial Ombudsman Service in the future.
BNPL firms say they welcome regulation as they want to support their customers.
Some BNPL services, usually those offered by banks, are already covered by regulation. These include Monzo Flex and Instalments by Barclays.
The power to bring in regulation to regulate all BNPL firms rests with the government.
We spoke to a mum-of-one who works but has to rely on buy now pay later for nappies and food.
Make sure to check out the alternatives if you're struggling with BNPL.
Get help if you're in debt
If you find yourself in this position, it's vital to get help sooner rather than later.
Speak to a debt charity like StepChange who can help you with everything from seeing if there's any state help you can get, to cutting your costs and dealing with any problem debts that have been building.
There are plenty of other services you can take advantage of and they offer free advice on how to manage debt.
Most of them can offer you free guidance and help in person, over the telephone or online.
- Money Helper – 0800 138 7777
- Citizens Advice – 0808 800 9060
- StepChange – 0800 138 1111
- National Debtline – 0808 808 4000
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