Edinburgh MP warns thousands more face debt after bid to control Buy Now Pay Later lenders rejected at Westminster

Thousands more families will end up in debt during the Covid crisis after a bid to protect people from controversial Buy Now Pay Later lenders was defeated at Westminster, an Edinburgh MP has warned.

Christine Jardine says the defeat of the amendment was a missed opportunity

Lib Dem Christine Jardine co-sponsored an amendment to the Financial Services Bill, which would have brought the lenders under the control of the Financial Conduct Authority (FCA), but the amendment failed.

Buy Now Pay Later (BNPL) credit has boomed during lockdown as people struggle to make ends meet, with one in four Britons said to have used such firms to pay for Christmas spending.

Ms Jardine, who is MP for Edinburgh West and Lib Dem Treasury spokeswoman, said the defeat of the amendment was a missed opportunity to prevent a potential repeat of the massive debt problems created by payday loan firms like Wonga, which went bust after tougher regulation were introduced in 2015.

"We could have steeped in now and made sure something on the scale of Wonga couldn’t happen again,” she said.

"Many people have felt they had no option but to over-commit themselves financially during the crisis. More and more people are being furloughed and made redundant so even if it seems affordable now, it might not be in a month.

"The scale of the potential problem awaiting us as we emerge from the current crisis is frightening.”

Surveys showed a 35 per cent increase in the number of people using BNPL schemes.

Ms Jardine said the FCA was conducting a review but it could take 18 months or more before it decided to bring in regulations and people will be left without protection during the pandemic.

"What Wonga taught us was the longer we take to act, the more people who will be caught up in it because these companies make money from people spending more than they can afford.

"The amendment would have forced the Treasury to introduce regulations within three months which would prevent people falling into debt. Now thousands more will end up in debt before regulations are introduced.”

Labour MP Stella Creasy, who led a campaign against payday loan firms, was the prime mover behind the amendment which was backed by 70 MPs from across the parties.

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