Consumer group Which? has warned that millions of UK shoppers using 'buy now, pay later' (BNPL) services may not realise they are taking on debt. The warning comes ahead of planned regulation by the Financial Conduct Authority (FCA), which is not expected until later this year or 2023.
BNPL allows shoppers to delay payment without interest or charges, unless they miss a payment, which can incur late fees. The three main providers are Klarna, Clearpay and Laybuy. The sector has grown rapidly during the pandemic, particularly among under-30s and those with tight finances.
Which? interviewed BNPL users who described the deals as a 'way to pay' or 'money management tool', not as credit. This lack of awareness could lead to problems such as late fees, negative credit reports, or debt collection if payments are missed.
The government announced in February 2021 that BNPL would be regulated by the FCA. A Treasury consultation closes on 6 January, followed by an FCA consultation. Which? is calling for immediate safeguards, including affordability checks and clearer terms and conditions, before regulation takes effect.
Rocio Concha, director of policy and advocacy at Which?, said: 'BNPL schemes can offer speed and convenience at the checkout, but our research shows that many users do not realise they are taking on debt or consider the prospect of missing payments.'
