Financial education needed after Buy Now Pay Later clampdown
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PayPlan welcomes the FCA’s decision to clamp down on Buy Now Pay Later (BNPL) credit. They are calling for stronger financial education in the sector.
What has happened?
The FCA stepped in to help better protect consumers from BNPL debt and other forms of lending. They did so using recommendations from The Woolard Review – a wider report into the unsecured credit market.
BNPL services allow consumers to spread the cost of their payments at the point of paying retailers. This allows consumers flexibility to suit their budgets. Firms have previously come under pressure for a lack of clarity in the way services were promoted, prompting guidance from the Committee of Advertising Practice. Now that guidance and regulation are in place, PayPlan is pushing for financial education to keep consumers safe.
Who is affected?
PayPlan found that of over 1,000 18-34-year olds surveyed, 73% said BNPL schemes contributed towards a debt problem later on. Although regulation of the sector is welcome, financial education is required to help customers better understand what agreements they are signing up for.
What support is available?
To support consumers with their relationship to money, PayPlan launched their Financial Wellbeing Hub. This resource helps consumers to better understand the different types of credit. It also helps with budgeting effectively, dealing with debts and setting financial goals. This is useful to younger consumers who may not have the experience in managing their finances.
Retailers offering BNPL are heavily present on social media and have an influence on consumer’s buying habits. PayPlan’s research into BNPL highlighted the role that social media has on such purchases. 59% of 18-34s said their lifestyle choices have in some way been influenced by online influencers. 30% said they overspent due to advertisements on social media.
Rachel Duffey, CEO of PayPlan, commented:
“We’re delighted with the FCA’s decision to regulate the unsecured credit market. We have been expressing our concerns about this form of credit for several years. It’s great to see there will be better protections in place for consumers which should help prevent problems further down the line.
“Looking ahead, we need to focus on financial education to inform people about the different types of credit and help them think about committing to purchases in the first place.
“Spreading the cost may be appealing short-term, but only if you have the means to make the repayments when they’re due. We believe our Financial Wellbeing hub is a great first step in equipping people with many of the tools they need for managing their money safely and preventing future debt problems.”