70 MPs have decided to vote down a bill which was supposed to regulate buy now, pay later companies like Klarna, Laybuy and Clearpay.
The BNPL industry has been growing immensely in recent years, with Klarna becoming a decacorn worth about $10.65 billion.
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Labour’s Stella Creasy has urged ministers to regulate BNPL, warning of a “financial scandal waiting to happen”.
According to data provided by Credit Karma, a 1/4 of Brits used buy now, pay later services to fund Christmas shopping, setting up a £2.3 billion bill.
“I am very concerned by any websites which prioritize BNPL. I’m very concerned by any companies that actually offer discounts to push people onto using BNPL,” said Creasy.
“I want to see responsible retailers step in where the Government has failed. It is a ticking time bomb particularly of younger consumers,” she added.
Research from Comparethemarket.com shows BNPL schemes are being used 35 percent more often now than before the pandemic.
Klarna said it charges no interest and no fees on its “most popular products”.
Boohoo said: “For many people who use BNPL, this method of payment helps them to manage their money.”
A spokesman for Clearpay said: “We support fit-for-purpose regulation that protects consumers, but also acknowledges their desire for flexibility when it comes to making payments.”