The British Fashion Council is facing a backlash after naming buy-now-pay-later payment service Clearpay as the principal partner of London Fashion Week, which kicked off on February 19.
A cross-party selection of 60 MPs has signed a letter expressing their concerns to the British Fashion Council regarding the sponsorship deal, a well as urging London Fashion Week organisers to provide debt warnings and advice on what it calls the “risk this form of lending presents”.
The concerns come after the government confirmed earlier this month that it was planning to regulate interest-free buy-now-pay-later credit agreements by giving the Financial Conduct Authority (FCA) authority to protect consumers.
The proposed regulations would mean that buy-now-pay-later firms such as Clearpay and Klarna, used by retailers including Asos, Boohoo, and Next, would be required to carry out affordability checks on customers and ensure the vulnerable are treated fairly.
In the letter from Labour MP Stella Creasy, it said: “We recognise that during the pandemic the British fashion industry has faced severe financial difficulty and that this is a partnership which has been in place previously. There is now recent and clear evidence of the problems this industry is causing to British consumers. The Financial Conduct Authority has documented how their unregulated behaviour presents a clear risk to UK consumers and needs urgent action. Without regulation, there is no such thing as responsible lending in this industry.”
60 MPs write to the British Fashion Council regarding concerns over Clearpay sponsorship
Campaigners fear that young adults are at risk of being lured into spending more, especially after research revealed in the letter suggests that one in four consumers used this form of buy-now-pay-later to pay for Christmas.
The letter, dated February 18, added: “Overall, 11 percent of consumers have used buy-now-pay-later companies since the start of lockdown, often due to financial distress of covid, and up to 10 percent have exceeded their overdraft in the same month as using a buy-now-pay-later product.”
Creasy, alongside more than 60 MPs are asking the British Fashion Council to provide warnings and debt advice on its London Fashion Week website and social media about the risks of buy-now-pay-later products.
Until the industry is regulated, the letter states: “As a responsible body, we urge you to provide details of the risks of using these companies and debt advice on your social media and publicity for London Fashion Week.”
Creasy, concluded her letter: “London Fashion Week should be an opportunity to showcase the creative talents of our country; yet this relationship has the potential to overshadow such a platform. We urge you to act swiftly to acknowledge these concerns and act to ensure that the price tag of participation is not personal debt.”
In an e-mail to FashionUnited, the British Fashion Council said on the issues surrounding buy-now-pay-now services: “The Financial Conduct Authority has acknowledged the benefits of products like Clearpay in the UK and by regulating the industry, there is more certainty for the customers and merchant partners. It is important that consumer protection is recognised through regulation.
“Clearpay has always supported fit for purpose regulation that recognises the diversity of the industry and desire from consumers for flexible payment options that don’t trap them in long term debt. Clearpay’s support of London Fashion Week gives the BFC a new way to support the industry and help jumpstart retail and make fashion more inclusive and accessible to the British public.”
The government has said that regulations are needed as many consumers do not view interest-free buy-now-pay-later as a form of credit, so do not apply the same level of scrutiny, and checks undertaken by providers tend to focus on the risk for the firm rather than how affordable it is for the customer. It added that legislation will be “brought forward as soon as parliamentary time allows” and that it will consult with stakeholders to ensure the approach to regulating buy-now-pay-later is “proportionate”.
Images: courtesy of London Fashion Week