Being able to purchase something immediately and then pay for it at a later date is nothing new. In fact, even hundreds of years ago people that couldn’t afford items they needed there and then, were able to negotiate deals with sellers to pay another time. In more modern times, lots of people will remember the days of the catalogue being delivered & items from it being bought with the idea that it would be paid off over X number of weeks. For many people, this way of buying items has been a lifesaver because it allowed them to purchase items that they would have otherwise been unable to afford. However, with the cost of living on the rise and online shopping becoming the norm it has long been time for an update on the regulations surrounding online shopping and payment options and it seems that the Government have taken note.
Shopping Online – Buy Now, Pay Later
The ‘buy now, pay later’ industry has seen a lot of growth recently, leading many campaigners and critics to say that regulation and limits on people who could be forced into debt, similar to people using mobile casinos without the right support in place. Online shopping is now very much the norm, with temptation coming at consumers from all directions. Not only are products advertised directly, but social media influencers often promote products and you can’t browse TikTok without being tempted into watching a live TikTok shop performance. Whilst this way of shopping is convenient and for many people, a great way to get the goods that they need, the temptation to buy something you can’t afford is strong, especially if you are someone that likes to stay on top of trends.
These days there are a number of third-party companies that integrate with eCommerce platforms to give consumers the opportunity to buy something now and pay for it at a later date. There are usually things like credit checks and ID checks in place but realistically these are being advertised everywhere and are extremely accessible. For many people, this way of buying items isn’t an issue, but if you’re someone that is vulnerable with money or has poor money management skills then it could be the start of a tricky journey. It is the fact that they are so widely advertised and easily accessible that has led many people to believe that there should be much stricter regulations in place surrounding buy now, pay later facilities.
The Changing of Regulations
This month it has been announced that the UK Government plan to clamp down on the ‘buy now, pay later’ industry by putting stricter rules and guidelines in place. Currently, the buy now, pay later industry is said to be worth over £ 6 billion, with many people worried that the money ploughed into this industry largely comes from people that can’t afford it. The people who use buy now pay later services are generally those without lots of disposable income and therefore could be seen as more vulnerable when it comes to using services such as this.
It has recently been announced that The Treasury will be releasing its first formal set of rules specific to this sector. Of course, there are already borrowing rules in place and plenty surrounding the finance industry but these new rules will be tailored towards the buy now, pay later industry and to ensure that everyone is kept as safe as possible.
The economic secretary to the Treasury John Glen said: ‘Buy now, pay later can be a helpful way to manage your finances but we need to ensure that people can embrace new products and services with the appropriate protections in place.’
To date, the industry itself has been unregulated, with no specific rules surrounding offering buy now, pay later as an option. This has led some experts to raise concerns about how consumers may be encouraged to use these facilities and whether what they are signing up for is made clear enough.
Moving forward it is thought that lenders will be required to ensure that loans and the amount consumers must pay made are affordable. There will also be specific guidelines around the advertising of buy now, pay later facilities and how it must not mislead, must be clear and must be fair.
Using Buy Now, Pay Later Facilities
For many people using buy now, pay later options for purchases is something that they find extremely useful and they wouldn’t want to be without. There are definite arguments for being able to buy large, unexpected items in this way – for example, a new car or a new washing machine. The concern comes when people use these facilities for frivolous items such as a new outfit to go out in at the weekend. Whilst everyone is entitled to use these facilities as they see fit, there could be concerns about people getting themselves further into debt for non0-essential items. There are also talks of utility bills being paid off with people then being able to pay back the 3rd party in instalments – at an extra cost.
Whilst the option to buy now and pay later probably isn’t disappearing anytime soon, it is something that is likely to become more and more regulated. We’re in a cost of living crisis currently with the cost of everyday bills showing no signs of slowing down. This could lead to more people needing to make use of these services; which if they come with hefty fees and charges doesn’t help in the long run. Instead, companies will be forced to be much more transparent and ensure that those using these facilities know exactly what they are getting into – not just in terms of costs, but potential consequences for things like missed payments. Used in the right way these facilities can be helpful for those on a strict monthly budget and regulations in place will certainly help them to be a much more sensibly used financial tool.
