Thanks to a rise in the advertising of Buy Now, Pay Later Loans and cross-platform social media promotion by ‘Social Media Influencers’, the steady rise of interest-free, buy now, pay later lending is set to continue into 2020.
It’s a worrying recent trend that can result in several thousand pounds of debt and all within the reach of a few clicks. Those most at risk are the so-called Millennial generation. Under 35s. Many of these consumers are students, or work part time with relatively low incomes.
Many of the brands that are heavily invested in the promotion of buy now, pay later models of payment include the likes of Boohoo, ASOS, Superdry and JD Sports. Brands which traditionally target younger shoppers.
Popular TV programmes including the likes of Love Island are awash with wannabe celebrities using their newly found fame to endorse Buy Now, Pay Later lenders and the brands that they represent.
In what is known as a debt spiral, people can make themselves overdrawn, or borrow additional funds on an existing credit card. Many will even use payday loans to pay off their initial buy now, pay later debts and then the robbing Peter, to pay Paul chain can escalate very quickly.
Buy Now, Debt Later Loans Warning
Trust Deed Scotland said “The key point for anyone considering buy now, pay later loans is that if you think that you can’t afford the purchase today. What’s going to change in 60, 90, 365 days’ time?”
“Inexperienced twentysomes are most at risk as traditionally they are a group who are the least capable of being able to budget effectively. What’s more, the casual nature of the wording and minimal information lulls younger people into a false sense of security and preys upon their experiences as a result.
Many store card lenders had been slow to adopt their own responsible lending procedures over the years and now we have a situation where a shop can switch its preference from store card lending to the buy now, pay later model with all the benefits of increased sales and yet fewer of the negative connotations attached to a traditional store card.”
Who Are The Buy Now, Pay Later Vendors?
Perhaps the most well-known is Klarna, with an ominous 6 million UK customers. The Sweden-based company have become the cool and trendy face of two click purchases on retailer websites offering anything from high street clothing brands to designer furniture brands. Nearly 60% of Klarna’s customers are under the age of 35.
Klarna is funded by venture capitalists and has celebrity backers including Snoop Dog.
Laybuy, is a New Zealand company launched in 2018 who refer customers to credit agencies after 30 days and then ClearPay, an Australian company with 500,000 customers. The BBC reported that the owner of the New Zealand-created firm intends to move to the UK in order to capitalise on a buoyant model here in the UK.
Buy Now, Pay Later New FCA Legislation
The FCA recently introduced new rules to help regulate the BNPL industry and save money for consumers. The new rules introduced in November 2019 mean that:
Firms cannot charge backdated interest on amounts of money that have been repaid by the consumer during the Buy Now, Pay Later offer period.
Firms must provide better information to consumers about Buy Now, Pay Later offers. The information should be more balanced and appropriately reflect the risks as well as the benefits of the product.
Firms must give prompts to consumers, to remind them when the offer period is about to end, so that consumers are more likely to repay the credit before they incur interest.
Buy Now, Debt Later – What Next?
At Trust Deed Scotland, we often say to our clients that if they do something about their debts today, they don’t need to worry about them tomorrow. Unlike buy now, pay later schemes – The sentiments are completely different.
Having helped over 20,000 people with financial difficulties in Scotland, we’ve spoken to individuals from all areas of the country, with differing reasons for why they found themselves with unmanageable debts.
Buy now, pay later may be a way of potentially building up unaffordable debt in Scotland, but it is not an unfamiliar story and over the years we have successfully navigated thousands of people towards a life after debt.
If you feel that you’ve built up unmanageable debts due to any type of lending, from credit cards and bank loans, to buy now pay later schemes, the best advice we can offer you is to seek help immediately. Call us on 0141 221 0999 or try our Trust Deed Wizard to find out if you could qualify for the Debt Arrangement Scheme, a Trust Deed and any other alternative solutions.