In Parliament today I called on the Government to take urgent action to tackle the looming crisis posed by the growth of unregulated, buy now pay later companies who target young people with explosive credit.
These companies allow people to buy items online and pay later, most commonly in three installments. Often people don’t realise they have taken out credit and simply assume it is an alternative method of paying when they are offered this at the online checkout. This means that people can be tempted to spend more than they would if they were paying in full, and can face potential costs and interest if they are unable to make repayments. Alarmingly, because of the lack of regulations, people are also unable to obtain support from the Ombudsman should they need to complain.
Recent statistics have shown that the use of buy now pay later companies has increased by 46% during the lockdown, and that this is becoming the largest source of consumer credit being taken out. These brands use social media savvy campaigns, bright colours, and popular influencers all to attract younger shoppers.
Speaking in the House of Commons, I said “Please may we have a debate on the fast growth of the buy now, pay later sector, as highlighted this week by Martin Lewis in the Treasury Committee? These firms are targeting predominantly under-30s who in the run-up to Christmas are shopping online with what is an explosive form of credit that may leave many in debt. Even some in the industry acknowledge that this form of credit needs to be regulated.”
In response, the Leader of the House of Commons Jacob Rees-Mogg said “the Honourable Lady once again raises a really important issue at Business Questions and I’m grateful to her” before acknowledging that “looking at these things early on is important”. He added that the Government would now wait to see what the Treasury Select Committee recommended on the issue.
Research has suggested that a third of people in the UK currently use buy now pay later companies and spend an average £560 a year through them. The sector is now expected to increase at an estimated rate of 39% per year.
The ongoing pandemic has highlighted the fact that buy now pay later schemes are here to stay and that they have the potential to create an avoidable crisis for many. I’m glad the Leader of the House of Commons recognised this vital issue and I hope MPs can now work across party lines to protect consumers from unmanageable and unregulated debt.