fears about young buyers’ debts mean buy now and pay later

These services, offered by major retailers, allow people to split payments without paying interest and are used by millions of shoppers

But the Financial Conduct Authority (FCA) said it was easy to find invisible debts of $ 1000 GBP to build

Now it will regulate the sector after the value of these services nearly quadrupled in the past year

Buy Now, Pay Later Services have been used by five million people in the UK for a total of £ 2.7 billion last year

However, one in ten people who use it already had debt arrears elsewhere This resulted in an extensive review of the FCA regarding credit services

Treasury Secretary of Commerce John Glen said, “By intervening and regulating, we ensure that people are treated fairly and that only agreements are offered they can afford – the same protection you receive from others Would expect credit “

Chris Woolard, who led the FCA review that recommended regulation, said it was convenient for some people to buy now, pay later, for others it was “a really easy way to get into problem debt.” to guess “

Under the new plans, providers would have to conduct affordability checks before lending and ensure customers are treated fairly, especially those who are vulnerable or struggling with repayments

Alex Marsh, UK head of the Swedish company Klarna, accepted that “now is the time for regulation” He said the company works with those who got into debt, but ultimately missed payments could be routed to the debt collection agencies

These companies allow customers to choose, at an online or physical checkout, whether they want to pay for items in installments or, in some cases, postpone payments for up to 30 days. Major operators include Klarna, Clearpay and LayBuy

They have proven popular with younger shoppers – especially by offering a cheaper way to try them out before buying or returning. Use of these services grew rapidly over the course of the pandemic, estimates put them at £ 4 each £ 100 currently spent in the UK buy now and pay later

Debt relief agencies and activists have argued that social media advertising, often through influencers, has glorified debt.They also suggest that the services can make it too easy to get into debt, and while total debt isn’t huge – that There is a risk of unaffordable borrowing

These companies don’t charge interest – instead they charge the retailer a fee and some late payment fees to the consumer – and they argue that they are more payment providers than lending companies do not fall under the same level of regulation as other lending providers such as credit card or credit card companies Lending Firms that Require FCA Approval and Affordability Checks to Lend

Currently, anyone who has a complaint regarding a financial problem with a purchase now or a later paid company cannot take their case to the financial ombudsman for an independent decision that should now change

Alice Tapper, who campaigned for a rule change on social media, said: “It was hundreds of people who shared their story with the campaign who made it painfully clear that the lack of regulation is at the expense of consumers especially those who are young and vulnerable “

Gary Rohloff, CEO and co-founder of Laybuy at 400However, 000 users in the UK said: “We believe we are already in a good place on regulation

“There has to be a balance to protect consumers but also to ensure that it maintains the innovation and simplicity that consumers value”

Sophie Edwards is a fan of fashion, but it’s an addiction she owed

She spent thousands of pounds on clothing, buying used clothes now, later paid for services, but then found herself “in a difficult position” when she was fired

“I used it for retail therapy to make me feel better,” she said, “It didn’t feel like real money

She still had to repay hundreds of pounds when she lost her regular wages

She paid off the debt and has since decided never to buy anything and pay for services later

The Woolard Review – the broader report on the credit sector that recommended the changes – made a number of proposals to assist those facing financial difficulties, particularly due to a pandemic

“New ways of borrowing and the effects of the pandemic are changing the market Billions of pounds are now in unregulated transactions and millions of consumers are at greater risk of financial hardship, “Woolard said

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Weltnachrichten – GB – Buy Now, Pay Later Companies like Klarna have to carry out stricter controls

Source: https://www.bbc.co.uk/news/business-55895162