The heavily-trailed consultation will propose placing BNPL firms under the watchful eye of the Financial Conduct Authority and give consumers the right to report complaints to the Financial Ombudsman.

In June last year the Government said lenders would be required to carry out checks to make sure loans are affordable for consumers, and financial promotion rules would be amended to ensure BNPL advertisements are fair, clear and not misleading.

Campaigners have complained about the slow pace of enacting reforms, with the current consultation running for two months, followed by a lengthy legislative process.

Opposition Labour MP Stella Creasey, says: “Having finally agreed to bring the ombudsman in, the government must expedite the necessary regulation because millions more people are now in debt to these companies. We cannot let these predatory firms have another year to profit off people struggling with too much money at the end of their month during the cost of living crisis.”

A recent report by the personal finance experts at NerdWallet revealed that as many as one in six (15%) UK consumer currently in debt owe money to Buy Now, Pay Later providers such as Klarna or Clearpay.

Philip Belamant, CEO and co-founder of UK firm Zilch, says: "We have long called for the entire industry to be subject to the same high regulatory standards that we already provide to our millions of customers. A lot of firms have paid regulation lip service but have yet to act - that’s about to change."

The government estimates that the new rules could help protect about 10 million consumers from “unconstrained borrowing”.

Announcing the consultation, Andrew Griffith, the economic secretary to the Treasury, says: “People should be able to access affordable credit, but with clear protections in place. That is why these proposed regulations are so important.”