More Britons Fall Prey To Debt Troubles After Subscribing To ‘Buy Now, Pay Later’ Services
27 Jan 2020
Approx Reading time: 2 minutes
- The popularity of ‘buy now, pay later’ services has caused an increase in the number of people subscribing to this debt option.
- Experts believe the underregulated industry is not doing enough to protect people from taking on more debt than they can afford.
The number of firms operating in the UK offering ‘buy now, pay later’ services, and the number of people subscribing to these services, has increased significantly
over the past few years, prompting fears that Britons are taking on too much debt on themselves through these services. Some of the most prominent firms offering these services include Klarna
, Laybuy, and also Clearpay. ‘Buy now, pay later’ services allow customers to purchase more than they can afford, splitting their total bill at checkout over a prespecified period of time during which they are expected to settle this amount in its entirety. However, at least according to charities providing free or low-cost debt advisory services to thousands of Britishers every year, these services might be leaving customers worse-off, especially considering the fact that some of these loan agreements are not being regulated by the Financial Conduct Authority. These firms are able to avoid many regulatory requirements because they are not charging any interest to their customers and also the loan term is under a year. This is also why ‘buy now, pay later’ firms don’t conduct any affordability or credit checks as well. Because of minimal checks before approving the loan amount, such lenders are providing debt even to those customers who are already financially vulnerable. According to Sue Anderson, who represents StepChange
(a debt charity), the number of people that have approached StepChange due to debt problems caused by subscribing to ‘buy now, pay later’ services is consistently rising. According to Lord Mann, a former MP from the Labour Party, regulatory authorities need to come up with newer regulations that could effectively govern the practices of ‘buy now, pay later’ service providers to ensure greater protection for vulnerable customers.