Payment Terms

Which? demands stricter guarantees for online shoppers using ‘pay later’ offers

Online shoppers need stronger collateral to protect them from BNPL (buy now, pay later) products as many don’t realize it’s a form of debt, a watchdog warned.

What ? said that “most” of the 30 BNPL users surveyed did not view the programs as a form of credit, meaning they could unintentionally expose themselves to serious default risks, such as late fees , marked credit reports or referral to a debt collector, the consumer group said.

Instead, users described BNPL as a “way to pay” or “money management tool,” rather than a credit provider.

While BNPL programs are a form of credit, not all of them perform credit checks, for example, and users can normally sign up to plan with a few clicks.

Which? found that it was this speed and simplicity when selecting BNPL at checkout that contributed to users’ misunderstanding, with one commenting: “Just ask a few questions so you don’t feel like you are enter into a credit agreement ”.

BNPL has grown in popularity in recent years as a way for consumers to pay for goods and services, with the largest supplier, Klarna, now having 13 million customers in the UK.

The study also revealed a low commitment to the terms and conditions of BNPL suppliers. Most BNPL users said they had read the terms and conditions or simply ticked a box to say they had read them in their entirety.

As a result, some users had a limited understanding of the consequences of missed payments, some participants were completely unaware that there were late payment fees.

Which? also found that BNPL users did not consider that they might have a hard time making refunds, and many mistakenly thought the programs were regulated.



Payment terms, late fees and potential consequences of missed payments should be communicated at time of transaction

Rocio Concha, which one?

The lack of understanding of BNPL products was of particular concern given that previous research found people were more likely to use them at stressful and difficult times in their lives, the consumer group said.

According to previous studies, missing a credit refund or a bill or experiencing a major life event like getting married, having a baby, moving house, or being laid off increases the chances of using BNPL by about a third.

Which? calls for stricter safeguards to protect consumers, including steps in the payment process to make sure people understand they are borrowing money when using BNPL, and warnings about the risks associated with the use of these programs.

Key information, such as payment terms, late fees and the potential consequences of missed payments, should be communicated at the time of the transaction to help consumers make informed choices, the group said.

Affordability assessments should also be performed for all BNPL transactions prior to the introduction of regulation.

Which? Policy and Advocacy Director Rocio Concha said, “BNPL programs can offer speed and convenience at the checkout, but our research shows that many users don’t realize they’re going into debt or consider the possibility of running out. payments.

“This is why there must be stronger guarantees to protect consumers and warn of the risks associated with the use of the programs. Payment terms, late fees and the potential consequences of missed payments should be communicated at the time of transaction.

“There should also be no further delay in draft BNPL regulations, which should include much greater marketing transparency, information on the risks of missed payments and credit checks before consumers are allowed to. use BNPL providers. “


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