Crackdown on buy now, pay later schemes to protect 10 million shoppers

Klarna-style plans have ballooned since regulation all but killed off predatory payday loans

A crackdown on unregulated buy now, pay later (BNPL) schemes is set to protect around 10 million Britons from borrowing what they cannot afford to pay back, ministers said.

The market for BNPL has exploded in recent years, lately buoyed by the cost of living crisis, as consumers are attracted to the promise of interest-free future payments for items they could not otherwise afford to purchase.

Companies such as Klarna allow retailers to offer their products to customers on monthly payment plans lasting 30 days to three years, in return for a commission. New legislation will target shorter plans as credit agreements lasting longer than 12 months are already covered by the Consumer Credit Act.