Labour’s Siddiq rebukes Hunt over delay to regulating ‘buy now, pay later’ lenders


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Labour’s shadow City minister Tulip Siddiq has rebuked chancellor Jeremy Hunt for delaying the regulation of the “buy now, pay later” sector.

Siddiq said the government’s “dithering” and “constant delays” to introducing regulation had “left millions of consumers at risk from bad actors” after Hunt pushed back plans to regulate the sector.

Treasury insiders said the biggest lender Klarna and several other companies warned they would quit Britain if regulation was “heavy-handed”. Those fears have caused continued hold-ups since the Treasury announced a delay in implementing draft legislation in July 2023.

One person with knowledge of Klarna’s discussions said the Swedish company had told the Treasury its short-term credit products would be made “unviable” by the proposed rules but had not threatened to quit the UK.

Siddiq said the delays had left the BNPL sector in “a state of uncertainty” and said Labour would rapidly introduce new rules if it won the general election expected later this year.

“Labour has a plan to urgently regulate BNPL so that it works for consumers and the sector. It’s time for this exhausted Conservative government to step aside so that Labour can act and govern in the national interest,” she told the FT Specialist’s Banking Risk and Regulation website.

The popularity of BNPL has surged during the cost of living crisis. Research by the Financial Conduct Authority last year found that frequent users of the products were more likely to be in financial difficulty.

Siddiq wrote to then-City minister Andrew Griffith in November offering Labour’s backing to get legislation over the line, arguing the issue should not be “party-political”.

Labour wants to make BNPL firms conduct so-called “affordability assessments” on customers, tracking their credit records more closely to avoid placing vulnerable consumers in debt, she said. 

Customers should also be given clearer information when they sign up, Siddiq added, with the Financial Ombudsman Service handling complaints about the products.

Klarna, which is preparing for an initial public offering, had raised hopes it might choose to list in London after establishing a UK holding company late last year. It has not decided on the location or timing of any listing but it is also considering the US, Germany or Sweden.

Hunt and Rishi Sunak, prime minister, have been working to safeguard the future of London’s ailing stock market, which has been shunned by a number of large companies in recent years.

Earlier this month, Australia began consulting on regulating BNPL firms, while the EU put rules in place in October.

It has been more than three years since the Treasury promised to “act swiftly” to regulate the sector after the FCA published a review saying there was an “urgent need” for controls.

One ally of Hunt said of buy now, pay later products: “We recognise this is an unregulated part of the financial services market. We need to find the best way of regulating without being too heavy-handed so that products are withdrawn from the UK.”

In January, Hunt told ITV’s Martin Lewis Money Show that 14mn people used buy now, pay later products every six months and said that for many people it was a “lifeline”.

The Treasury said: “When used appropriately, buy now, pay later can be a useful, interest-free way for consumers to manage their finances.

“We must ensure that regulation of these products is proportionate to ensure borrowers are protected without unduly restricting access.”

Klarna, which declined to comment, said in November the sector should be regulated.

Ellesheva Kissin is a reporter at Banking Risk and Regulation, a service from FT Specialist



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