Martin Lewis has issued a warning to online shoppers using buy now pay later schemes including Klarna, Clearpay and Laybuy.
During a segment on The Martin Lewis Money Show Live, the financial journalist explained how buy now pay later schemes are to be regulated by The Financial Conduct Authority (FCA).
This is something the founder of MoneySavingExpert.com and other consumer champions have been campaigning for to help protect people using the delayed payment schemes.
More online retailers are displaying the option at checkout, where it typically offers payment options in three, interest free instalments, instead of a regular one-off payment for purchases.
Martin said: “This is being marketed often at young people, it’s even been talked about in some ways as a ‘lifestyle choice’, but it is not. It is a debt.”
He added that it should be treated as a debt and how, if used right, like other debts, it can be good if you’ve got a “one-off, planned, budgeted for spend” and can spread the cost over three months.
However, he warned: “It can also be bad. If you miss a payment it can hurt your credit score and debt collectors could come to you.”
Martin explained that the reason the repayments are interest free is because the lending companies charge retailers and tell them that consumers will spend more if they use their services.
“Overspending is a real problem here, it makes it too easy for people to just spend when they shouldn’t because they don’t have the money,” warned Martin.
The 48-year-old recently gave evidence to the Treasury committee advising them that the buy now pay later sector needed to be regulated.
The Treasury agreed with the report submitted by the FCA that things like affordability checks will need to be put in place. It also means if consumers have issues in the future, they will be able to raise it with the financial ombudsman service.
Martin added that it hasn’t happened yet as it needs to go out for consultation, but change is coming.
The Martin Lewis Money Show Live airs at 8.30pm on STV.
