Financial Services and Markets Bill (Ninth sitting)

Harriett Baldwin Excerpts

Committee stage
Thursday 3rd November 2022 Public Bill Committees

[Dame Angela Eagle (Wallasey) (Lab)]

I add my voice to those supporting new clause 1. I commend my hon. Friend the Member for Kingston upon Hull West and Hessle for her speech on this very important issue and my hon. Friend the Member for Walthamstow, who has long campaigned to bring buy now, pay later credit companies into some form of regulation. Obviously, their emergence has been assisted by the shift to online shopping, which we all have experienced and which was turbocharged during the lockdowns.

The consumer credit legislation that protects customers from taking on unaffordable levels of debt and paying over the odds for credit, in a way that is often quite opaque, did not anticipate the existence of online shopping or the explosion in the kind of credit that is now easily available to those who roam the internet or look at TikTok and see lovely things that are just within reach. I speak as someone who has been around for quite a while and whose parents used to put money away in shops so that they could afford Christmas presents, before consumer credit exploded in the way that it did. The Consumer Credit Act tried to make that fair and to regulate it. This is another switch in velocity, capacity and the availability of things, and it is very difficult to discern what the price is when you take something out.

We are now in an instant gratification culture, rather than the place where we said, “Put money away months before and hope you can afford to get the Christmas presents you want for your kids.” It is now a case of instantaneous availability—literally a click on a website. Klarna and various other of the buy now, pay later organisations are everywhere that it is possible to spend money. It is very difficult to imagine how that might be adding up—what the price of it actually is—when a person is in the middle of a purchase, particularly a younger person who is used to that kind of instant availability. It is very difficult for anyone to argue sensibly that the people who are clicking and making those purchases have a good idea of the price of the credit and the burden of the repayments they are taking on.

New clause 1 seeks to bring the new fintech ways of getting access to consumer credit—if I can put it that way—within the existing consumer protections in the Consumer Credit Act 1974, which admittedly is now pretty long in the tooth. Clearly, it is important for those to whom we give the job of protecting consumers to think in detail about how that can best be done, but it is pretty difficult to argue that we should allow the current circumstances to persist. I am interested to hear what the Minister has to say about that.

It is important that people have time to think about what they are doing and that the pricing of credit is obvious at the time of the click, so that people can make genuine decisions and not feel that they have been conned, that the price is wrong or that they have got themselves into a vortex of increasing costs that were not in front of them at the time. The consequences of allowing an entire generation to have access to that kind of consumer credit without protections are too dire to contemplate.

I hope the fact that this Parliament has always put consumer protection at the heart of what it does and legislated for that purpose will prevail, and that the Minister will think about how we can sensibly and quickly bring this part of the growth industry of credit, including consumer credit, into the protected space.

[Harriett Baldwin (West Worcestershire) (Con)]

Thank you, Mr Sharma, for allowing me to contribute to the debate on new clause 1. My colleagues on the Treasury Committee have raised a very interesting and topical subject for us to debate regarding the best way forward. I must declare an interest, as someone who has bought things on the internet and has used this convenient way of paying for them. Clearly, when we have the FCA in front of us, we need to ask how it is approaching regulation in what has been an area of innovation, where fintech has really come to the fore.

It will be very interesting to hear the Minister’s reply to the points that have been raised, and what he sees as the best way forward. That innovation is supporting our retail sector, but at the same time, consumers deserve to know what they are getting into and to have good information when they make decisions. I look forward to hearing the Minister’s comments.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I, too, support new clause 1, not because I wish to stop buy now, pay later as a form of credit or to restrict people’s choice, but because I want people to fully understand what they are getting into before they do it. I did not understand what Klarna was. I like the Space NK website as much as the next woman who likes to spend too much money on skin products, but I could not quite understand why all of a sudden, about two years ago, Klarna was mentioned as a means of buying now and paying later. I thought, “How terrifying. If you cannot pay that ridiculous price this month, how are you going to pay that ridiculous price next month?”.

My hon. Friend the Member for Walthamstow has done some brilliant work on this issue. Buy now, pay later is the form of credit for the under-30s. They use it more than store cards or credit cards. It is often used on clothing websites, primarily by young women who buy different sizes to see which dress they actually want.