Consumer group Which? has warned that many UK shoppers using 'buy now, pay later' (BNPL) services do not realise they are taking on debt, calling for stronger safeguards ahead of planned regulation by the Financial Conduct Authority (FCA).
BNPL allows shoppers to delay payment for items without interest or charges, but late fees can apply if payments are missed. The three main providers—Klarna, Clearpay and Laybuy—have seen explosive growth during the pandemic, particularly among under-30s and those with tight finances.
Which? said many users it interviewed viewed BNPL as a 'way to pay' or 'money management tool' rather than credit, exposing them to potential problems such as late fees, credit report damage or debt collection if they fail to pay on time.
The government announced in February 2021 that BNPL would be regulated by the FCA, but rules are unlikely to take effect until later this year or 2023. A Treasury consultation closes on Thursday (6 January), followed by an FCA consultation.
In the meantime, Which? urged BNPL firms to make terms and conditions more accessible and conduct affordability assessments for all transactions before regulation is introduced.
