Claro Money: Buy Now Pay Later regulation must arrive soon to add consistency and protection to consumers

As the UK hesitates to tighten regulation on the ‘buy now pay later’ industry, Klarna has announced it is to voluntarily add new stronger credit checks to help customers determine whether they can afford future repayments. The CEO of the first financial coaching app, Claro Money, Rob Brockington, says: “Self-regulation cannot be relied upon as an industry-wide solution to the BNPL problem – it still fails to protect the consumers’ interests.

“One BNPL provider offering to self-regulate unfortunately does not go far enough to solve a wider industry problem where there are at least 20 large BNPL providers who all need to improve their unsecured lending practices. Self-regulation has never proven to be a successful form of regulation and is often too little too late.

“While we welcome the changes Klarna is making, these must go further and not be confined to single BNPL providers. The Woolard Review recommended regulation of the sector more than six months ago however we are still waiting for changes to be made and the consultation promised in the summer to happen. A consultation provides an opportunity for research into the matter to be shared, and serious questions to be asked around the provision of consumer credit.

“The recent ‘self-regulation’ and changes by Klarna have been prompted by the extensions to the Swedish Payments Act 2010 which requires providers to offer at least one payment method that does not involve the extension of credit to the consumer. It also requires online merchants to accept at least one payment method that doesn’t involve credit.

“The changes being made by providers now are in anticipation of regulations being enforced in the UK. The downside to making these changes before a review and the release of regulation is the inconsistent approach in which these services are offered. And, when you consider the breadth of the market and that new players are entering every week, this could create serious confusion for the public.

“We want to help consumers develop a smart money mindset, and the use of better language when engaging with these products is also important. It should be clear that a customer is borrowing money that must be paid back following strict payment terms. Stricter affordability checks are also required as we approach a busy consumer sales period where consumers can often exceed their budgets. This is particularly important as we head into the golden quarter – Black Friday, Cyber Monday and Christmas – shopping season.

“There needs to be consistency across BNPL providers to ensure that customers’ financial interests are always protected and a self-regulatory approach by some still leaves vulnerable consumers at risk.”

Claro is a subscription-based app that offers affordable and accessible financial coaching and tools to help everyone achieve their financial goals.


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About Lisa Baker, Editor 2423 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.