Watchdog worried that buy now pay later lenders aren’t being honest with us
Buy now pay later has come under the spotlight again after a warning that we could be misled by companies that aren’t upfront about the costs.
The financial watchdog the FCA warned shoppers that the short-term loans were being promoted in adverts without details about the charges and risks.
The risks they’re concerned about are customers taking on debts they can’t afford and what happens to people who miss repayments.
The watchdog also pointed out that missed payments could affect our credit score. And it said that some ads lacked detail about when charges would kick in.
Buy now pay later loans spread repayment on purchases like clothes over a few weeks. The sector isn’t regulated but the FCA does keep an eye on adverts to make sure they don’t mislead us. They’ve stepped in over more than 4,000 promotions by retailers or social media influencers this year already. Offending ads have to be taken down or amended.
They feel consumers could be under more pressure to use buy now pay later because of the cost-of-living crisis.
The lenders make money by taking a cut from what we spend when we buy something. They’ll often offer credit to those of us who would otherwise struggle to get through borrowing checks. But their late-payment fees can hit our credit score, making it even harder to borrow in future.
The FCA didn’t single out any particular lender but said consumers, especially those of us on low incomes, must get the right information before using buy now pay later.
Before signing up to buy now pay later, we should make sure we’ll be able to repay. We should also check the small print to find out what charges will kick in if we can’t pay.