Fuels debt fears as Britons go on buy-now-pay-later spree

As British shoppers gear up for a multibillion-pound Black Friday and Christmas splurge, lawmakers have called for urgent regulation of ‘buy now, pay later’ fintech services, which they say lead many people to spend beyond their means.

Britain has seen an explosion of online platforms such as Klarna, Clearpay and Laybuy, which let consumers buy goods interest free and spread out payments.

“I’m really worried how many people will get into debt this Christmas as these companies push them to spend more than they can afford,” parliamentarian Stella Creasy told the Thomson Reuters Foundation, accusing lenders of “predatory” behaviour.

Black Friday kicks off the Christmas shopping season when retailers offer big discounts on everything from toys to TVs. Almost 10 per cent of Britons are planning to use ‘buy now, pay later’ (BNPL) options for Christmas shopping, according to consumer charity Citizens Advice.

But Creasy said the combination of Black Friday promotions and ‘pay later’ platforms was “like pouring petrol on fire”, especially for those struggling financially due to the pandemic.

She warned that people risked amassing unmanageable debts as retailers encourage them to go all out for Christmas following the axing of last year’s celebrations due to soaring Covid-19 cases. Lawmakers, who debated the issue in parliament this week, urged the government to publicise the risks of the borrowing mechanism ahead of the festive season. Critics say the platforms risk normalising and glamourising debt - charges strongly refuted by Klarna and other lenders. A Klarna spokesperson said consumers were switching to BNPL because credit cards charged extortionate interest rates and used “dirty tricks” to trap people in debt.

‘Significant harm’

‘Buy now, pay later’ is also booming in other countries including the United States, Australia and elsewhere in Europe, partly spurred by the increase in online shopping during the pandemic.

In Britain, transactions more than trebled during 2020 to a value of 2.7 billion pounds ($3.6 billion).