Buy now, pay later is a disaster waiting to happen this Christmas

Buy Now, Pay Later (BNPL) is growing increasingly popular among UK shoppers, but many are oblivious to the dangers of the new payment practice, a report from Barclays suggests.

The bank recently polled 2,000 UK adults who have used BNPL and found that two in five (39%) don’t really know how the payment method works. In fact, some (19%) didn't know that some BNPL providers charge late fees for missed payments, while others (20%) weren't aware that missing instalment payments hurts their credit score.

Buy now, pay later functionality has become increasingly common across ecommerce sites in recent years, Barclays suggests. In fact, more than a third (35%) of respondents said they were “more likely” to use it more in the future, as prices keep going up. 

Many shoppers (36%) use it to buy more than they are able to afford, leaving some people (25%) who have taken out loans with multiple BNPL providers struggling to keep track of their expenses. 

Missing out on customer protection

The biggest problem, according to Barclays, is the fact that often lending isn’t regulated. Thorough checks of the customer’s personal financial circumstances don’t always get carried out, resulting in people not being able to pay back the loan comfortably. 

Another problem with unregulated loans is the lack of customer protection. Purchases made with credit cards and regulated PoS loans are covered by Section 75 of the Consumer Credit Act, meaning the lender must protect goods and services between $130 and $40,000, for free. Money spent on faulty or non-delivered goods can also be returned.

With regulated loans, consumers can also escalate different issues to the Financial Ombudsman Service (FOS) for free, a feature unavailable for unregulated products. 

“Too many people are taking out these loans without realizing the impact it could have on their finances and with festive shopping in full swing, it’s important shoppers don’t run risk of signing up to agreements, which they may struggle to repay affordably in future,” said Antony Stephen, CEO of Barclays Partner Finance.

“To protect consumers against taking on more debt than they can comfortably afford to repay, and to ensure minimum standards exist across the sector, we believe regulation should ensure all BNPL providers are required to undertake appropriate affordability assessments, consistent with those in place for other regulated consumer credit products.”



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