'Buy Now, Pay Later' Deals Come Under Fire

Ros Altmann, debt campaigner and former pensions minister, has told The Guardian that the rise in 'buy now, pay later' (BNPL) payment methods presents a significant risk to the economy.

BNPL finance is perhaps most well known for its association with the purchase of a new kitchen or sofa, but is increasingly available from clothing, homeware and lifestyle retailers, prompting campaigners to call for the implementation of more stringent affordability checks and cooling-off periods to minimise the risk of consumers getting themselves into debt. 

Swedish Fintech company Klarna recently announced it had partnered with a new merchant every eight minutes in 2019, offering consumers the opportunity to pay for items 30 days after purchase or via several interest-free instalments.  Around 6 million UK customers are currently using Klarna and the company states it is adding 55,000 new customers a week.

Concerns over BNPL credit facilities include the fact that customers can be enticed by initial interest-free offers which later become interest-bearing, and the fact that people can lose track of their debts - particularly when there are a large number of smaller payments - and struggle to keep up with repayments.  

A recent Hastee study on workplace wellbeing advised that BNPL finance is causing over a third of UK millennials to overspend. 

Mr Altmann told The Guardian, “Financial resilience across the population is weakening, debt levels are rising and if too many customers are unable to repay their debts in future, we could see a repeat of the financial crisis,” 

“I would like to see regulators insisting on cooling-off periods and affordability checks before customers are allowed to take on debts.

“The risk of another economic crisis caused [by] irresponsible lending is rising, and regulators should take this seriously.”

Source : Insight DIY Team

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