Wbg, one of Scotland’s leading independent specialist full-service accountancy firms, has issued a warning to consumers that ‘buy now, pay later’ (BNPL) loans can serve as a stepping stone into debt if not used responsibly.

Consumers who use BNPL loans are to get new safeguards against unaffordable borrowing and credit-card-style protection for their purchases, under new rules outlined by the UK Government to take effect from 2026.   

Research carried out last year by the FCA found that 14 million people had used BNPL, and frequent consumers were more than four times more likely to have missed a credit commitment than those who had not used BNPL with consumers aged between 18-34 being the most affected.

BNPL is currently largely unregulated and offers consumers no protection. While many consumers appreciate the ability to make purchases without immediate payment, the implications of this financial trend raise concerns.

Paul McDougall, Insolvency Practitioner at Wbg, said: “It’s crucial for consumers to approach this service with awareness. While BNPL can provide immediate gratification and help spread costs over time, it can also serve as a stepping stone into debt if not used responsibly.” 

Key dangers of BNPL services:

1. Debt Accumulation: Many consumers underestimate the risk of accumulating debt when they opt for BNPL. With multiple purchases across various platforms, consumers may find themselves juggling multiple payments, leading to potential financial strain.
2. Impact on Credit Score: Some BNPL providers perform credit checks, while others do not. Regardless, missed payments can negatively affect a consumer’s credit score, complicating future borrowing.
3. Consumer Behaviour: The convenience of BNPL may encourage impulsive spending. Studies suggest that consumers are more likely to make purchases they cannot afford when offered deferred payment options.
4. Lack of Financial Education: Many users may not fully understand the terms and conditions of BNPL agreements, which can lead to unexpected fees and complications.

To navigate the BNPL landscape responsibly, Wbg recommends that consumers:

• Budget Carefully: Assess their ability to make payments before committing to a purchase.
• Read the Fine Print: Understand the terms of each BNPL agreement, including interest rates and potential fees.
• Limit Usage: Use BNPL sparingly and prioritise essential purchases to avoid unnecessary debt.

For more information or to speak with a debt advisor at Wbg, please contact phone 0141 566 7038.

ENDS

For further information please contact Paul McDougall on 0141 566 7000.

Issued on behalf of Wbg by Liquorice Media tel 0141 332 4935 www.liquorice-media.com

Date: 7 Nov24