Complaints against BNPL firms surges by 36%

Complaints against BNPL firms surges by 36%

Complaints to the Financial Ombudsman Service against buy now pay later (BNPL) firms have risen by 36% in the past three years, according to analysis from Creditspring.

Its analysis found that 220 complaints were made against BNPL firms during 2022, compared to 208 in 2021 and 162 in 2020.

Creditspring stated that the Financial Ombudsman Service is not responsible for BNPL complaints, but as people are regularly reaching out to them it suggests they have no place else to go.

Usage levels of BNPL are rising. Data from Equifax shows that over 4.1m shoppers used BNPL products for the first time in 2022.

Complementing this, Creditspring’s own research found that 29% of people use BNPL at least once a month, but 9% are unable to repay the money they owe. Among 18–34-year-olds, 16% are unable to make repayments. Worryingly, Creditspring suggested eight million people in the UK do not believe you can get into debt through BNPL.

Creditspring co-founder and CEO Neil Kadagathur said, “If used correctly, BNPL offers more flexibility to UK shoppers. However, like many credit options, these products are offered or promoted in a way that encourages people to use them recklessly. If people use BNPL for multiple purchases at once, in a couple of months’ time the total repayment amounts due can rapidly spiral out of control.

“Borrowers urgently need support now so the onus is on lenders to ensure that they’re educating borrowers over credit the risk, protecting borrowers from debt and lending more responsibly with stringent affordability checks.”

Kadagathur added that the rising complaints indicate a need for stronger regulatory action, but fears we are still a long way away from this.

FinTech Global recently spoke to players in the BNPL space about whether 2023 would be a good or bad year for the sector. With inflation rising and the cost-of-living putting financial pressures on people, it questions whether firms can make enough profit and how BNPL would be used for purchases.

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