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Retailers react to disposable vape ban.

5 Feb 2024

The retail sector has been responding to government plans to ban disposable vapes as part of plans to tackle the rise in youth vaping.
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UK’s indie food retailers to be recognised in the Farm Shop and Deli Retailer Awards 2024.

23 Jan 2024

Bakers, butchers, cheesemongers, delicatessens, fishmongers, greengrocers, village stores and small farm shops from around the UK have been shortlisted in the Farm Shop and Deli Retailer Awards... Read more…

How Independent Retailers Can Stand Out in A Crowded Market

23 Jan 2024

An interesting article has appeared in Forbes reflecting many of the issues that Indie Retail & ActSmart members will be experiencing – the challenges and... Read more…

Eight in Ten Small Businesses Taking Positive Steps to Strengthen Their Enterprises in 2024

22 Jan 2024

Eight in ten small business owners (81%) are planning to develop their companies in 2024, according to new research from Novuna Business Finance. The research shows that over a third (33%) are... Read more…

The Times names 12 of the UK’s best independent bookshops — as chosen by its readers.

22 Jan 2024

The Times has named 12 of the UK’s best independent bookshops — as chosen by its readers. Readers highlighted places that combined books with a friendly and welcoming atmosphere.... Read more…

Bira Launches Second Annual Campaign for Valentine's Day - #LoveYourHighStreet

22 Jan 2024

The British Independent Retailers Association is championing the high street again this Valentine's Day for the second consecutive year with its #LoveYourHighStreet campaign.
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Family-run shop in Lanarkshire village scoops community retailer award for second year running.

10 Jan 2024

Nads Store, a family-run shop in Law, Lanarkshire, has been named Community Retailer of the Year at the Scottish Asian and Business Awards ceremony for the second year running.
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Bira urges vigilance against loan fee fraud following FCA guidance.

10 Jan 2024

In the face of the escalating threat of loan fee fraud, the British Independent Retailers Association (Bira) is urging its members to heed the Financial Conduct Authority's (FCA) recent guidance... Read more…

Canal boat record store Rubber Ducky Records is back afloat.

9 Jan 2024

Canal boat record store Rubber Ducky Records is back on the water after it sank last April, ruining over 1,000 vinyl records and a stow of music equipment stored on... Read more…

New research shows UK retail sector powered by entrepreneurs and start-ups

9 Jan 2024

While mass-market players continue to dominate the UK retail industry, research by Geek Retreat shows that 15% of Brits have set up their own business in the past ten years, and of these,... Read more…

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Buy Now Pay Later providers cause concern across UK as debt rises

Posted on in Business News, Cycles News, Creative News, Outdoor News, Political News

BNPLIncreased scrutiny is being placed upon the UK's growing use of Buy Now Pay Later (BNPL) services. Multiple investigations have revealed a developing pattern reflecting that as these trendy lenders continue to grow in popularity, as does the amount of debt racked up by poorly informed consumers.

The growing levels of debt being created by these payment services has led to calls for BNPL providers to take on more responsibility in their evaluations of who should be accepted for their lending services.

 

"Increasing number of concerns being raised"

Research has shown that the BNPL lending services are particularly popular among the younger age group, with Generation Z reported to have racked up some serious debts through the use of BNPL providers such as Klarna, Laybuy and similar providers.

Financial campaigner, Alice Tapper, said that she had received hundreds of messages from distressed young people, particularly in lockdown, with one in six 18 to 24-year-olds having turned to buy-now-pay-later services. One user as young as 16 was able to bypass one provider's website security and credit checker and land herself in hundreds of pounds in debt.

This mounting problem was bought to the attention of Labour MP Stella Creasy, who has now written to the Financial Conduct Authority and the Advertising Standards Authority to raise the issue of BNPL. Stella Creasy previously campaigned against pay day loaners Wonga in 2014, which led to the FCA, the financial services industry watchdog, investigating Wonga and forcing it to write off 330,000 loans worth £220m and compensate 45,000 other customers. That Stella Creasy is now identifying similar issues with BNPL providers should certainly raise concern.

The increasing number of young shoppers getting into large amounts of debt arising from BNPL services has also led to a rallying of debt charities making their support available to shoppers. Debt charities including Stepchange, the Money Advice Trust, the Debt Support Trust and Christians Against Poverty are calling on BNPL firms to better explain the risks to customers' finances in their adverts. Stuart Carmichael, chief executive of the Debt Support Trust, described some BNPL adverts as "misleading".

While there is evidently an increasing number of concerns being raised, a major issue with some BNPL providers such as Klarna, is that they are not authorised by the UK's Financial Conduct Authority (FCA) but use "passported" permissions from their own countries to operate in the UK. While Klarna is regulated by the Swedish Financial Supervisory Authority, Alice Tapper has called for all BNPL products to be regulated in the UK. On Klarna's pay-later products, there is no legal compulsion to include risk wording on adverts and at checkout and accordingly she observes there is therefore "no counter balance to this genius marketing".

 

The growing impact on UK shoppers

The growing demand for online products and services has fuelled a rapid increase in the use of BNPL providers. Only last year, Klarna became one of the largest fintech start-ups in Europe after a new funding round valued the Swedish payments group at $5.5 billion.

The lack of UK oversight combined with the fast growth of BNPL providers has resulted in numerous instances of confusion over consumer credit checks and fees, potentially leading to long-term impact upon an individual's ability to borrow in the future where they get into arrears now.

With the level of complaints about BNPL providers having greatly increased during the lockdown, Klarna - which has eight million customers in the UK alone - responded to the growing debt crisis. Klarna's vice president, Luke Griffiths told the BBC "Obviously with people's financial circumstances changing during this period, we have constantly reviewed our policies around the type of customer that we accept". He then went on to say that the firm is only accepting customers who it believes will and can repay on time.

 

Encouraging responsible lending

With high levels of customer confusion leading to growing consumer debt it is evident that BNPL shopping is not sustainable and that something must change in the way money is loaned. Growing concern among an array of stakeholders begs the question as to whether buy- now-pay-later providers will be forced to face repercussions for the debts arising. Might this lead to a repeat of the Wonga situation, with firms facing fines for providing access to credit that consumers cannot afford to service or repay?

Some debt charities argue that it is the retailer's responsibility to educate their customers of the risks being undertaken when committing to any BNPL payments. Although with impulse buying being popular among many Gen Z's and Millennials, it is questionable if any attention will be paid to prior warnings made by the retailer. But it should also be recognised that in many cases the retailers may not understand the product sufficiently enough to fully and correctly educate their customer.

It is evident that all BNPL providers operating in the UK should be regulated by the FCA and ASA in line with existing UK based providers and that retailers require the necessary support and education regarding BNPL products and the potential risks to their customers.

 

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