Shropshire and Telford & Wrekin’s not-for-profit savings and loan co-operative has welcomed the Government’s announcement that they intend to take ‘swift action’ to protect consumers by prioritising the regulation of the Buy Now Pay Later market.

Just Credit Union say Buy Now Pay Later (BNPL) agreements are a way to buy goods on credit and pay for them later. They say this might be through regular interest-free instalments or after an interest-free period.

These offers have become very common at high-street shops, but particularly with online retailers.  Whilst the consumer does not pay interest, the retailer pays a commission to the BNPL provider.

Steve Barras, Development Officer at Just Credit Union, said: “These offers can be a great way of spreading the cost of an item, but they are not without their dangers and are currently unregulated.

“Many organisations like ourselves, who are focused on improving people’s financial wellbeing, have long had concerns about this situation so we warmly welcome this announcement.”

The lack of regulation of Buy Now Pay Later (BNPL) loans result in consumers not being offered the same protection as other forms of borrowing. The Treasury has now announced plans to tighten up the rules in a bid to protect consumers.

Just Credit Union believes this is likely to  include BNPL providers needing to be approved by the regulator and that they ensure loans are affordable. Advertising and promoting in a fair, clear and none-misleading way will be required and consumers will be able to complain to the Ombudsman.

Steve said: “Whilst BNPL regulation is clearly a priority for the government, realistically it’s unlikely regulations will be in place until 2026 at the earliest. We are therefore encouraging people to be very careful using these offers, particularly in the run-up to Christmas when it can be very tempting to overspend.

“Citizens Advice have reported that this year so far they have helped more than double the people they helped in 2022 with a BNPL issue. Most of those are facing difficulties dealing with debt repayments and are falling behind on essential bills or needing emergency support, like food bank vouchers.”

He added: “Just Credit Union wants to help people to avoid these problems so has put together some seven simple tips to use BNPL safely.”

Useful Tips

– Do you really need the item or are you only tempted because of the option to pay later?

– Use the 24 hour rule – don’t buy immediately, give it 24 hours and then decide. Make sure you understand the commitment, how much you repay and when.

– Check the consequences if you miss a repayment. Make sure you can afford the repayments out of free cash not additional borrowing and build in some headroom.

– Can you still afford the repayment as other expenses rise? Most importantly, keep track of all your commitments and ensure you have the full picture – it’s really easy to get over-committed without realising until it’s too late.

Just Credit Union say the most important thing to remember when taking out a BNPL agreement is it is debt and it has consequences. It may be more appropriate to take out a structured loan from a provider like Just Credit Union who will ensure the loan is affordable.