Buy now, pay later' customers hit by aggressive rates and fees

Christmas debt

The Citizens Advice Bureau (CAB) has highlighted issues with ‘buy now and pay later’ deals from catalogues, which can leave customers with surprise bills.

The main problem appears to be with back-dated interest payments that, in some cases, end up costing as much as twice the price of the product does itself.

CAB says that in 2016, it helped 24,000 people with mail order debt problems, with 70% of these being related to debt repayment problems. Further data reveals that the average debt is £1,300, and people age 25 to 29 are especially susceptible to running into problems of this type.

According to the CAB, the deals allow people to delay their payments for a specific period of time – for example, 12 months – but in the case of not paying it off in full by this agreed date, interest owed is backdated to the very start of the deal.

 

An example provided by the charity runs as follows: one man bought a laptop for £700 on a one year interest-free deal. Health problems forced him to give up work, and he missed the final instalment of £150. This resulted in a final bill that “cost almost as much as the laptop”.

CAB wants to see clearer terms when these deals are advertised. Chief executive Gillian Guy says: “Buy Now Pay Later deals help people spread the costs of catalogue purchases but it’s vital customers understand what they are signing up for and what will happen if they don’t repay on time.

“Clearer explanations by catalogue firms when advertising these deals will prevent people being hit with shock bills that could send them spiralling into debt.”

 

In related news, The Financial Conduct Authority (FCA) on 29 November of this year announced that it was seeking feedback on its report on high-cost credit, short-term credit, and catalogue debt comes under this term. The deadline for feedback is set at 15 February, so any proposals will be published later next year.

Published: 21 December 2016
Last updated: 21 December 2016

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