Consumer watchdog Which has called for more vigorous precautions to be in place regarding Buy Not Pay Later (BNPL) options, as new research by the firm revealed consumers are unaware of the debt risks associated with the product.
The payment method’s popularity has skyrocketed in recent years, providing consumers with an alternative, flexible method to pay for goods and services. However, recent research by Which, consisting of interviews with 30 typical BNPL users, has caused concern surrounding shoppers who are seemingly unaware of the risks involved with the ‘pay later’ option.
Out of those interviewed, many saw BNPL as a ‘way to pay’ or a ‘money management tool’ instead of a credit provider, suggesting that shoppers might be “unwittingly exposing themselves to serious risks of missing repayments, such as late fees, marked credit reports or referral to a debt collector”.
The speed and simplicity of the payment method contributes to the misunderstanding, Which noted in a release, with many users also stating they tend to only skim the terms and conditions of BNPL providers. As a result, some participants indicated they were not aware of late payment fees at all, others failed to consider if they were able to make repayments and many wrongly assumed the schemes were regulated.
In its report, Which referenced its previous research into BNPL products, that found people were prone to using the method at stressful and challenging times in their lives, such as a missed credit payment or major life event.
Ultimately, the company has requested for BNPL providers to implement stronger safeguards to protect customers, including steps at the checkout process to help shoppers fully understand the risks. It also asked for key information, such as payment terms and late fees, to be communicated at the point of transaction and for more accessible terms and conditions.