Christmas debt fears as shoppers use ‘buy now, pay later’ to overspend

online shopping There are fears that shoppers could be unwittingly driving themselves into unsustainable debt by using controversial “buy now, pay later” services to fund their Christmas shopping. Buy now, pay later has boomed in popularity in recent years, with the coronavirus lockdowns driving more shoppers to make their purchases […]

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There are fears that shoppers could be unwittingly driving themselves into unsustainable debt by using controversial “buy now, pay later” services to fund their Christmas shopping.

Buy now, pay later has boomed in popularity in recent years, with the coronavirus lockdowns driving more shoppers to make their purchases online. Many retailers now give their customers the ability to shop without spending a penny of their own money up front.

However with the Christmas shopping season now underway, a report by the Money and Mental Health Policy Institute, a charity, has warned that shoppers could be spending beyond their means by using these services. It said many online retailers had constructed their websites so that it was easy for consumers to overspend, with those suffering from mental health issues particularly vulnerable.

Klarna, Clearpay and PayPal are some of the most high-profile firms offering buy now, pay later services to British shoppers. Most well-known high street brands use one of these three to facilitate purchases.

As well as promoting buy now, pay later above traditional payment options, one-click ordering and the use of personalised recommendations can also cause people to spend more than they can afford, the report added.

It estimated that more than three million people with mental health problems have found it harder to control their online spending since the spring lockdown began. There are fears that overspending will rise as Christmas approaches and retailers try to lure in shoppers with high-profile sales events such as “Black Friday”.

The Money and Mental Health Policy Institute has called on retailers to allow customers to opt out of seeing buy now, pay later services during the checkout process. People with mental health commonly struggle with impulsivity, reduced concentration and low morale, making it more difficult for them to control their spending, it said.

An Opinium poll found that people with mental health problems were more than twice as likely to overspend than the general population. More than half of those surveyed said that buy now, pay later firms made it too easy for people to get into debt.

Helen Undy, of the Money and Mental Health Policy Institute, said: “Online retail can be a lifeline for people living with mental health problems who may struggle to leave the house, especially during the pandemic. 

“But pushy sites and tempting buy now, pay later offers  can cause people to spend more than they can afford, risking both their financial and mental health.” 

She added: “At its worst, this can leave people in thousands of pounds of debt, with a single day’s shopping spree causing years of misery.”

Gareth Shaw, of consumer campaign group Which?, said: “It’s important that retailers and buy now, pay later firms act responsibly, so it’s concerning that people with mental health problems risk being persuaded to spend more than they can afford when buying products online, particularly as we head into the Christmas period.”

Mr Shaw said the City watchdog, the Financial Conduct Authority, should take action against firms and prevent shoppers from racking up debts that they cannot afford to repay. 

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