AJ Bell press comment – 19 August 2022
Laura Suter, head of personal finance at AJ Bell, comments of the FCA’s warning to Buy Now Pay Later firms:
“The borrowing boom in the UK has already begun and Buy Now Pay Later use will undoubtedly rise in the next few months as more people turn to debt. Rising prices and wages failing to keep up means only two options for many – falling back on savings or taking on debt. With use expected to boom the regulator is attempting to crackdown on adverts and social media posts to make sure they lay bare all the risks involved.
“Buy Now Pay Later is seen as the friendly, less scary debt option for many who want to defer the cost of paying for things. Providers have spent a lot of time packaging it not to look like debt and to make it seamless for people to borrow money, who often use it without fully understanding how it works and end up spending more than they otherwise would. What’s more, the industry is known for burying fee information in the small print or failing to inform customers of the impact on their credit files and future borrowing by missing payments
“Since its launch, Buy Now Pay Later use has soared in the UK, and it’s become embedded in online shopping. You can buy everything from a £42,000 Bulgari watch to your weekly food shop at Iceland and defer the payment. But a worrying aspect is that there isn’t good data on the size of the market and debt taken out through Buy Now Pay Later isn’t counted in official debt figures from the Bank of England. This means there is a hidden underbelly of debt that UK people are taking on, but the scale of which is unknown.
“As the cost of living bites, more and more people will use Buy Now Pay Later. But they should remember the golden rules of using any debt: don’t take it on without a way to repay it, only use it if you’ve exhausted all other options and don’t use it to buy things you don’t need. They should also make sure they understand the implications if they miss a payment or aren’t able to repay the debt at all.”
