The expert
affairs at the Money Advice Trust, the charity that runs National Debtline, said people ran the risk of being contacted by debt collection agencies and could have their credit ratings affected if they failed to make scheduled payments.
She said: “Buy now pay later schemes may provide flexibility for some people but it can also be an expensive way to borrow.
“If you are unable to pay and exceed an interest- free time limit, charges may soon rack up.”
She also urged firms offering these services to explain better the risks to customers in their adverts.
From this month, M& S’s online shoppers are being offered a deferred payment option on purchases over £30 across its clothing and home products.
The retailer has par tnered with buy now, pay later company Clearplay. M& S said the move was the latest step in its “far reaching transformation” to become more relevant to customers.
Kirstyward, director of M&S bank and services, said: “We are committed to providing our customers with seamless, easy and convenient ways to pay, and that’s why we’ve introduced this fully integrated and interest- free option to help spread the cost of shopping.”
As well as Clearplay and Klarna, other popular buy now, pay later companies whom retailers have joined forces with include Afterpay and Laybuy.
Among their partners are fashion retailers such as JD Sports, Quiz, Pretty Little Things and Boohoo.
Ewan Macdonald- Russell, head of policy at the Scottish Retail Consortium, said many retailers were simply now offering innovative payment options.
“These enable customers to spread the cost of purchases over a longer period – a choice that many customers find useful in the build-up to the festive season.
“Of course, retailers work hard to keep down prices and to ensure shoppers are given all the necessary information so they don’t inadvertently ov e r s t re t c h themselves.”
Customers in Scotland have been quick to take up interest free deferred payment schemes but some admit to being in the dark about the potential pitfalls.
Luke Griffiths, Klarna’s UK general manager, said the company is clear about the terms of its pay later products.
He said: “It wouldn’t be responsible for us to lend to everyone. We do eligibility and affordability assessments.
“We have a dedicated team in place to support the very small minority of our customers who fall into financial difficulty.”
Leading retail analyst
The main driver for retailers to offer these schemes is desperation.
A lot of it is down to retailers simply trying to steal a march on the guy next door.
There is also the thought that if a competitor hasn’t picked up on a buy now, pay later strategy then they could pick up some business that the other guy doesn’t.
It is not just about keeping up with the Joneses but keeping a step ahead of them. But there is a worry about the relatively light credit checks associated with these schemes.
It reflects a mentality among retailers where they feel they have to try everything they can to attract business, even if there are dangers associated with it.
The thinking is that buy now, pay later is a one-off opportunity to get sales – cash in or you won’t get a second chance.
It’s about the numbers of customers rather than profitability, in a hell-for-leather race for bums on seats.