Shoppers are at risk of being plunged into debt with Buy Now Pay Later schemes, consumer watchdog warns
- Customers using Buy Now Pay Later schemes were charged £39million in late fees last year, according to research by Citizens Advice
- BNPL schemes have tripled in popularity during the coronavirus pandemic
- Consumer watchdog Which? finds some companies are not warning customers about the risks of late payments
Shoppers are being bombarded with Buy Now Pay Later schemes – often without being warned of late fees or the risk of falling into debt, a report has found.
More than half of the UK’s biggest online retailers analysed were offering at least one form of payment plan, consumer watchdog Which? found.
The majority were heavily promoting the schemes – yet several did not offer information on the dangers of late payment.
One in eight shoppers using online ‘buy now, pay later’ schemes have been chased by debt collectors, Citizens Advice warned (stock image)
Research by Citizens Advice last month found those using ‘BNPL’ were charged £39million in late fees over the past year.
Which? said the failure to ‘clearly communicate the risks’ could leave customers with poor credit ratings or even referred to a debt collector.
BNPL schemes have surged due to the convenience of letting shoppers pay for items in 30 days or weekly instalments, interest-free.
Their popularity tripled during the pandemic as shopping was driven online, the Treasury found.
Klarna, one of the largest BNPL providers, says a risk warning should always be included to tell customers that borrowing more than they can afford can ‘seriously affect’ their finances.
But Which? has found some retailers were not adhering to such guidelines.
The risk warning was not found on the sites of 23 retailers offering the payment plan.
But not one of the ‘pay later’ checkouts – which is a payment option on some on leading retailers’ websites – warned customers they could be referred to debt collectors for missed payments (stock image)
The investigation looked at the BNPL options on the websites of 111 of the biggest online retailers in fashion, baby and child, and homeware products.
Research showed major life events, such as moving house or having a baby, increased the odds of using such payment options by a third.
Klarna said it upheld the ‘highest standards’ in ensuring customers were aware of its terms and conditions.