A Barclays report suggests that Buy Now, Pay Later (BNPL) is becoming increasingly popular among UK buyers, but many are unaware of the dangers of the new payment practice.
The bank recently polled 2,000 UK adults who have used BNPL and found that two in five (39%) do not actually know how a payment method works. In fact, some (19%) were not aware that some BNPL providers charge late fees for missed payments, while others (20%) were not aware that non-payment of installments would increase their credit score. gets harmed.
Barclays suggests that the Buy Now, Pay Later functionality has become common on e-commerce sites in recent years. In fact, more than a third (35%) of respondents said they are “more likely” to use it more in the future, as prices keep rising.
Many buyers (36%) use it to buy beyond their capacity, leaving some (25%) who have struggled to keep track of their expenses with multiple BNPL providers.
miss out on customer protection
The biggest problem, according to Barclays, is that often lending is not regulated. The personal financial circumstances of the customer are not always thoroughly scrutinized, as a result of which people are not able to comfortably repay the loan.
Another problem with unregulated loans is the lack of customer protection. Purchases made with credit cards and regulated PoS loans are covered under Section 75 of the Consumer Credit Act, which means the lender must protect goods and services worth between $130 and $40,000 for free. Money spent on defective or non-delivered goods is also refundable.
With regulated loans, consumers can refer various issues to the Financial Ombudsman Service (FOS) for free, a feature not available for unregulated products.
“Many people are taking out these loans without realizing the impact on their finances and with festive shopping in full swing, it is important that buyers do not take the risk of signing agreements, which they can make appropriately in the future. Barclays Partner Finance CEO Antony Stephen said.
“To protect consumers from taking on more debt they can comfortably repay, and to ensure that minimum standards are in place across the sector, we believe regulation should ensure that all BNPL providers needs to conduct appropriate affordability assessments, which are in line with the space for other regulated consumer credit products.”
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