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Feb 20, 2023
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BNPL complaints jumps but are still small, almost £1 in every £8 was spent via BNPL in January

Published
Feb 20, 2023

Consumer complaints over buy-now pay-later (BNPL) financing are growing as the cost-of-living crisis pushes more shoppers into spreading the cost of some purchases.


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The UK’s Financial Ombudsman Service (FOS) has said BNPL complaints jumped 36% to 220 last year, up from 162 in 2020, according to figures obtained via a Freedom of Information request by lending firm Creditspring and seen by City AM.

Some 4.1 million consumers used the products for the first time in 2022 as rising prices squeezed shoppers’ spending power, according to data firm Equifax. And last month, it was revealed that nearly £1 in every £8 spent online in January was sourced via BNPL providers, according to research by Adobe Analytics.

While the government plans to bring the sector under the remit of the Financial Conduct Authority, which will be granted powers to withdraw authorisation from firms, Neil Kadagathur, chief of Creditspring, said it will take time for the new rules to be implemented. 

Given it has taken two years to reach this point, we’re unlikely to see the much-needed consumer protections appear anyntime soon,” he said.

Under the draft rules, BNPL firms will be brought into the remit of the FOS, which will have the powers to intervene in disputes between shoppers and BNPL lenders. However, the suitability of the body to police the sector has come under scrutiny.

Huge case fees at the FOS means BNPL firms may be incentivised to pay off any disputes before they’re investigated and scrutinised, the paper notes.

“Because the case fee is so high, there is a strong incentive to just give the customer £50 rather than see this go all the way up the chain,” a senior BNPL executive told City AM on condition of anonymity.

“This isn’t a bad outcome for the consumer, but it takes away a key element of the regulator’s duty, which is visibility of problems in the market, because the FOS doesn’t actually see any of the customers’ complaints.”
 

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