10 Percent of Buy Now Pay Later Customers Ambushed By Debt Collectors

14 September, 2021 by Denzil Otieno 5 mins read Category:  Credit Cards Money Personal Finance

As per Citizens Advice, ten percent of buy now pay debt collectors have pursued later shoppers for unpaid debt. Charity’s research also revealed that around one-eighth of the 18 to 34-year-olds using the program had been contacted by or referred to debt collectors.

The buy now pay later option is available at the checkout on retailer websites. Most shoppers prefer this payment option because it spreads the costs while allowing you to avoid pricey credit card debt in the future.

Unfortunately, it has been noted that some individuals wind up spending more than they expected and accumulating debt that they cannot pay back.

The Regulation of Buy Now Pay Later Agreements

The Financial Conduct Authority (FCA) will be responsible for overseeing and regulating interest-free buy now pay later contracts, as stated by the government in February.

According to a Citizens Advice recent study, buy now pay later buyers in the UK were jointly charged £39 million in late charges in the preceding year.

The FCA also commissioned a poll of more than 2,000 adults in the United Kingdom to find out who had used the service in the previous year.

From the poll, ninety-six percent of individuals sent to a debt collector for missing payments stated that they had suffered unfavourable consequences.

Some negative experiences included ignoring calls, emails, and letters if they had something to do with bills, borrowing money to pay off the debt, and poor mental health.

Concerns About Misinformation 

According to a report by The Charity, customer credit agreement information is hidden in small print or terms and conditions, resulting in misinformation.

When asked by Citizens Advice, BNPL businesses admitted that they had referred customers to debt collectors. It was only done as a last option by Klarna, ClearPay, Laybuy, and Openpay. Furthermore, it stressed that debt collectors do not have much authority compared to bailiffs.

Besides, debt collectors don’t usually come to people’s homes, but it does happen periodically, and they don’t have the right to seize their stuff. Moreover, unpaid court judgments prevent bailiffs from seizing a buy now pay later debt.

According to Citizens Advice, a woman in her 60s gave up on her online plant purchase. When she received an email informing her that she had signed up for a buy now pay later deal, the enthusiastic gardener attempted to cancel her transaction.

In an interview with Citizens Advice, she said she never knew how she ended up purchasing plants on buy now and pay later and, even worse, didn’t have an idea of what it was about. A few days later, she received an email warning of the impending contact with debt collectors.

The poor woman was unable to sleep and afraid that someone would break into her house. Even worse, there were concerns that the woman would develop health problems out of fear. 

The Understanding that Buy Now Pay Later is Credit

Millie Harris, a debt counsellor at Citizens Advice East Devon, expressed her worry that many shoppers did not understand the buy now pay later concept. She revealed that most shoppers were not aware of the consequences if they did not pay.

She (Millie Harris) also confirmed that she has seen many people use it to buy clothes and shoes for their children—giving them the flexibility to pay in instalments. Millie says that shoppers use the buy now pay later but have never perceived it as a debt. 

For example, if you help someone with tens of thousands of pounds in debt and does not realise that buying and paying later is a portion of that total—it’s an unnoticed debt.

Citizens Advice CEO Dame Clare Moriarty stated that smooth purchase now pay later checkout procedures do not need customers to rummage around in the tiny print to know that they’re entering into a credit arrangement and can be sent to debt collectors if they can’t pay.

Citizens Advice recommends that anybody approached by debt collectors must seek free independent debt advice.

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