Klarna Laybuy respond to Woolard Review BNPL regulation move
Buy now, pay later big hitters Klarna and Laybuy have responded to today's publication of The Woolard Review into the unsecured credit market.
As part of the review, interest free buy now, pay later credit agreements will be regulated by the FCA, after rapidly increasing in popularity due in no small part to the coronavirus pandemic driving shoppers online.
By regulating the products, consumers will be able to seek recourse with the Financial Ombudsman Service, should they have a complaint.
Klarna said that it supported the move.
“Current regulation is nearly 50 years old, it has not kept pace with newer products and changing consumers’ needs. It's time for modernisation so it is fit for purpose,” the company tweeted.
Meanwhile, Gary Rohloff, Managing Director and Co-Founder, Laybuy, commented: "Firstly, I think it’s important to stress that if offered responsibly, credit offers many positive opportunities for consumers.”
“Ever since we started Laybuy, we have set high standards of information and transparency for customers. Today’s report makes clear it is time for the industry to step up.”
He added: “BNPL is an effective and lower risk tool to help people manage their budget. It’s important that these products remain available for consumers, the vast majority of whom value BNPL services.”
“We therefore welcome the government's recognition that the sector must retain its fundamental utility.”
Rohloff acknowledged that there are concerns about the affordability and potential of debt for customers using BNPL services.
“This is why we are the only provider to conduct a hard credit check on customers and have always worked with credit reference agencies. We reject around 25% of people applying to use our services,” he said.
"Our default rates are low (<5%) in comparison to other forms of credit such as credit cards, but if a customer does get into trouble and falls behind on payments, then there is a clear line of communication and will always work with the customer and support them.”
“Our business is not built on minimum payments or late fees, nor should anyone else's.”
He concluded by arguing that the BNPL space is in a good place when it comes to regulation.
There does, however, need to be a balance to protect consumers, but also make sure it retains the innovation and simplicity that consumers value.”
“We will work closely with the regulator and the government ahead of the next steps,” he stated.
Stella Creasy
Last month, Labour MP Stella Creasy called on fashion retailers such as boohoo and Missguided to temporarily halt BNPL schemes, labelling them a “financial scandal waiting to happen”.
She made the comment as the UK government voted down her cross-party amendment to the Financial Services Bill, which sought to introduce regulations on BNPL providers.
More on that here.
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