Martin Lewis issues urgent warning on buy now pay later plans
Martin Lewis took questions from consumers tonight on his Money Show and Amelia wrote in to ask Martin for his expert advice on buy now pay later options. Amalia wondered if using them over paying for items outright would be beneficial and if her credit rating would be affected.
In his response, Martin detailed firms like Klarna, Clearpay and Laybuy have “just exploded”.
He continued: “They’re almost at the end of most retail transactions, and they’re not regulated.
“These firms, for that action, are not regulated. Now that means their products and design, there’s no oversight of them.
“And if you have a problem, yes it can affect your credit score.”
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Recently, the Advertising Standards Authority announced these companies must be clearer in their advertising about offering credit to consumers, so they understand they are taking on a new debt.
Generally, when using buy now pay later methods, consumers are encouraged to make purchases and pay for their goods at a later date – this could be in installments over the course of a month, or up to 30 days after the purchase is made.
For larger purchases, the payments could even be staggered over several months.
PayPlan looked into their usage and in a survey of over 1,000 18-34 year olds, it was revealed 70 percent used a buy now pay later plan to make purchases.
Further to this, the debt advice company found that 73 percent said that buy now, pay later schemes contributed towards a debt problem later on.
While the schemes are designed to help with budgeting, PayPlan detailed consumers can get bogged down with deadlines on multiple purchases and can end up missing payments.
Some shoppers don’t understand that buy now pay later is a form of debt at all.
From 2018 to 2019, PayPlan saw a 49 percent increase in clients entering into a debt plan with buy now pay later problems.
Jane Clack, PayPlan’s expert debt adviser, welcomed the Advertising Standards Authority’s decision.
As she commented: “It’s good to see the ASA has clamped down on how Buy Now Pay Later is advertised to consumers to better protect those considering using the scheme to make purchases.
“This could help keep people out of debt.
“The long-lasting effect of missing repayments can damage bank balances credit scores, so this new ruling on how the schemes are advertised is a step in the right direction.”
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