The hidden costs of buy now pay later deals

Posted by Erika Bone in Personal Finance on 3 January 2017 - Erika is a Credit Analyst at checkmyfile

Citizens Advice have warned that young people between the ages of 25 to 29 are being hardest hit by hidden clauses within “Buy Now, Pay Later” deals. Thousands of people are being faced with unexpected bills when they fail to meet the original terms and conditions of their buy now pay later agreements.

These deals have traditionally allowed people to defer payments on a purchase for an agreed period of time but if a person fails to make the full and final payment by the arranged deadline, interest charges calculated from the beginning of the agreement will be added on to the remaining total.

Citizens Advice have warned that the addition of the interest charges can leave customers with a bill amounting to twice the price of the original purchase. The charity stated that this is an unrelenting issue that they deal with and they have helped at least 24,000 people with over 50,000 catalogue and mail order debt problems in 2016 alone.

Using data gathered from the cases that have been brought to them by the public, they have recognised a pattern of exceptionally high fees, derisory affordability checks and oppressive debt collection methods and as result of this have now called on the Financial Conduct Authority to step in to make sure lenders act with greater transparency.

Citizens Advice chief executive Gillian Guy asserts that, “Buy Now, Pay Later deals help people spread the cost of catalogue purchases but it is vital customers understand what they are signing up for and what will happen if they fail to repay on time. Clearer explanations by catalogue firms when advertising these deals will prevent people being hit with shock bills that could send them into spiralling debt.”

The FCA are currently conducting a review of short-term, high-cost credit which includes catalogue debt and have promised to, “look across all high-cost products to build a full picture of how these are used, whether they cause detriment and, if so, to which consumers.”

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