Buy Now Pay Later 'tricks shoppers into spending more' warns Which?

BUY now, pay later firms should be fully regulated to better protect shoppers, consumer website Which? has urged.

The group fears slickly designed, easy-to-access credit products are encouraging impulse buying, with nearly a quarter of buy now, pay later users saying they spent more than they planned because the service was available.

Which? wants the Financial Conduct Authority (FCA) to be given new powers to regulate providers of this type of service, arguing this would help it monitor customer treatment so it can step in if necessary to prevent harm.

The regulator launched a review in September of unsecured credit, including "buy now, pay later" firms.

Around one in 10 buy now, pay later users told Which? they have incurred late charges when paying this way.

Four in 10 people in the survey of more than 2,000 participants who were aware of this type of credit did not believe or did not know that missing a payment could lead to the firm passing debts on to a debt collection agency.

How to cut the cost of your debt

IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.

Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money

Work out your budget – by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs

Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker

Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)

Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them

Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay

Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further

Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans

The group's call comes after consumer champion Martin Lewis told the Treasury Committee this week that there has been an "explosion" of buy now, pay later schemes, many of which are aimed at younger adults.

On Wednesday, Mr Lewis urged "maximum speed to move this into the regulatory environment", adding: "Our political classes have failed if we regulate in two years' time – two months' time would be alright."

Which? said "pushy" marketing strategies and "express checkouts" could drive people to over-spend. It said fashion retailers may be particularly likely to feature prominent buy now, pay later adverts.

The consumer group also found a quarterof buy now, pay later users said they had not planned to use this type of payment option until it popped up at checkout, while nearly a fifth said they used it because they were offered a discount to do so.

Just over one in 10 also said they used it by accident because it was selected as the default payment option at checkout.

One consumer told Which?: "I was tricked into (using) it because the box was already ticked."

Which? said buy now, pay later firm Klarna previously commissioned a study into online shopping behaviour. The consumer group said the report, intended for partner retailers, explained how to design "customer journeys" that will persuade people to make "emotional" purchases.

Klarna told Which?: "While we cannot speak for the sector as a whole, it is wholly incorrect to claim that Klarna uses 'pushy marketing strategies'.

"All Klarna customers are provided with our terms and conditions, which clearly outline the potential consequences of non-payment.

"If a customer misses a payment, we will proactively contact them to remind them via text, email, in-app notifications and letters.

"Klarna will only refer unpaid debts to a debt collection agency as a last resort after a period of several months. Klarna is fully engaged with the FCA review of the unsecured credit market."

Jenny Ross, Which? money editor, said: "While buy now, pay later services offer speed and convenience at the checkout, our research shows their design makes it far too simple for shoppers to spend more than they were intending.

The Sun consumer teams has previously covered the perils of buy, now pay later, with warnings for parents coming from debt charities.

Which?'s research comes after "threatening" debt letters that "make people suicidal" were banned in October after a campaign by Martin Lewis.

We reported on how online shopping sprees using "buy now, pay later" schemes left one shopper £1,500 in debt and homeless.

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