Don’t fall foul of buy now, pay later blight
BUY NOW, pay later (BNPL) allows you to spread payments across a period of time on an interest-free (and wholly unregulated) basis. It’s become increasingly widely used for many goods – especially clothing and electronics – with the three main providers, Klarna, Clearpay and Laybuy, growing rapidly. However, it can also be a quick ticket to unsustainable debt. Mary, 21, from Brighton, “shopped herself into spiralling debt” with BNPL. No one checked she could afford the debt and she now feels that it was too easy to obtain.
Kevin, from Portsmouth, purchased a laptop using BNPL. It was faulty so he returned it and notified the BNPL provider. However, a further payment was taken and, three months on, he still hasn’t been refunded.
While BNPL has been a godsend to many hit by the costof-living crisis, the market is unregulated so buyers may struggle to get satisfaction if they have a problem.
However, this is set to change with new rules proposed.
All BNPL schemes will need to be approved by the Financial Conduct Authority (FCA). At present, firms can lend money without making any inquiries about affordability. But under new rules, schemes will have to implement affordability tests and advertisements must be fair, clear and not misleading.
At present, consumers have no right of redress if they have cause to complain about a BNPL scheme because the Financial Ombudsman Service (FOS) has no jurisdiction.
Under new rules, the FOS will have jurisdiction to hear complaints about BNPL schemes, which is great news.The Government’s view is also that Section 75 protection should apply to such transactions between £100 and £30,000 (as is the threshold with all other credit products). This means you’ll be able to make a claim if something goes wrong, such as your parcel going missing or a faulty product.
The bad news is these changes are not coming any time soon.
The Government has announced draft legislation towards the end of this year, followed by secondary legislation by mid-2023, after which the FCA will run a consultation.
So until then, be careful not to overextend yourself like Mary or continue paying for faulty goods you’ve returned, like Kevin.