Potential Risks Of ‘Buy One, Pay Later’ Products

Are you an online shopper? Do you patronize ‘buy one, pay later’ (BNPL) products? Oh well, there is really nothing wrong with it. Just that many influencers fail to highlight the potential risks of BNPL when they post the adverts online, a regulator has warned.

According to a watchdog, Financial Conduct Authority (FCA): “Financial promotions must explain the issues of unaffordable debt and missed payments, even if the product itself is unregulated.”

The FCA actually confirmed that consumers could be misled by some BNPL adverts not knowing there are thorns to those roses.

It said posts must be clear and fair, and include prominent risk warnings.

“As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services,” said Sheldon Mills, executive director at the FCA.

“Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions.”

Buy now, pay later has become a commonplace method of payment and credit for UK shoppers in recent years.

It allows people to pay for purchases in instalments over a short-term fixed-payment schedule and interest-free.

Some 17 million people in the UK, including 30% of those aged in their 20s, have used it. While popular, it has led to concerns over levels and visibility of debt – particularly as budgets are squeezed by the rising cost of living.

Buy now, pay later firms have been under pressure from watchdogs over contract terms and conditions, but as yet these services remain unregulated.

The watchdog said it had seen financial adverts on websites and social media which could have breached rules by failing to include prominent warnings on:

• Risks of tacking on debt that people cannot afford to repay
• The consequences of missing repayments
• A potential impact on credit files of missed payments
• Any information about when fees need to be paid
• So far this year, the FCA said its action against firms that had breached its rules had led to 4,226 promotions being changed or withdrawn.
• However, debt charities say that the regulation itself needs to be clearer and more consistent.
• “A patchwork of rules and protections, depending on which provider you use, is a poor placeholder for clear and consistent regulation,” said Matthew Upton, director of policy at Citizens Advice.
• “The Treasury said it will regulate, but every day that passes without action leaves consumers unprotected and unaware of the consequences of this new form of credit.”

Back home in Nigeria, we might not really have regulators as effective as the FCA but at least you have known that there are terms and conditions that could be draconian. Therefore, be guided.