Buy now, pay later shoppers chased by debt collectors – your rights if it happens to you

SHOPPERS who use buy now, pay later (BNPL) to cover costs are being chased by debt collectors, according to new research.

Citizens Advice said one in 10 BNPL users had been refered to debt collectors, rising to one in eight among young people.

Millions of shoppers in the UK use BNPL firms such as Klarna, Clearpay and Laybuy, to split or defer payments.

But many are unaware that their details could be passed on to a debt collection agency if they're unable to meet their payments.

A study by Citizens Advice found that of the Brits that were referred to a debt collector, the vast majority experienced negative consequences.

In total, 96% reported at least one of the following: sleepless nights; ignoring texts, emails and letters in case they were about debts, avoiding answering the door, borrowing money to repay the debt, or their mental health getting worse. 

However, the charity found that none of the BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments.

Instead this was only flagged in the terms and conditions on a separate page.

Citizens Advice conducted mystery shopping at 100 leading retailers and found 38 offered BNPL, with 22 offering more than two BNPL options, meaning there were a total of 74 BNPL checkouts. 

The research also found that out of those offering BNPL, only 11% warned shoppers they were taking out a credit agreement, the remaining 89% put this information in the small print. 

Will your debt be passed on to a collection agency?

We asked the major UK buy now, pay later firms what their policy is towards handing claims over to debt collectors.

Laybuy, Klarna and Clearpay confirmed that they do refer customers to debt collection agencies, but only as a last resort.

A spokesperson for Laybuy said: We don’t want any customer to take on a debt that they cannot afford. That is why we credit check every new customer, and set strict credit limits, to ensure we are not extending credit to customers who cannot afford it."

The spokesperson added: “Laybuy only refers a customer to a debt collector as a last resort, and only after other attempts to collect the outstanding payment have been exhausted.

"When a debt is referred to a debt collector, we only ever refer outstanding purchase price of the product.

"Late fees, which are limited to a maximum of £24 for a single order, are never passed to a debt collector. Laybuy also pays all the cost for debt collection.”

Alex Marsh, head of Klarna UK, said: "At Klarna we only ever use debt collection agencies to help us contact customers we are unable to reach and we do this on fewer than 1% of orders.

"The Debt Collection Agencies we work with are all FCA authorised and will only contact customers by telephone or email and do not use bailiffs. We encourage any of our customers whose circumstances have changed, to please get in touch so we can help you with a plan to get back on track.”

Georgina Whalley, interim UK chief executive of Openpay, said: “Openpay doesn’t use enforcement agents, bailiffs or any other form of in-person debt collection service.

"We do refer some outstanding arrears to a third party, but Openpay customers are only contacted via SMS, email and post – never in person."

Clearpay and Paypal did not respond to a request for comment.

What are your rights?

A debt collector is not the same as a bailiff or enforcement agent.

Debt collectors may work for your creditor, or they may work for a separate debt collection agency. They're sometimes known as doorstep collectors or field agents.

They do not have special legal powers and can't visit you at work, come into your home without your permission or talk to your friends or family about your debt.

Unlike a bailiff, they aren't allowed to take any of your belongings or clamp your car.

They should not act in an intimidating way.

Debt collectors can visit your home in person, but they will usually call or write to you first.

They must show proof of ID and you don't have to open the door or let them in.

They have to leave if you ask them to and they are not allowed to take anything from your home.

It could be a criminal offence if a debt collector pretends to be a bailiff. A bailiff can usually only come to your home after a court judgement.

According to debt charity Stepchange, they can also ask you discreetly about your debt and try and set up a payment arrangement.

They might ask you to pay them there and then, but it is usually better to contact the company after the visit to set up a payment plan.

If you feel a debt collector has behaved improperly, you can complain.

How to get help

While it could be tempting to ignore the problem until it goes away, it is never a good idea to bury your head in the sand when it comes to debt collection.

If you ignore a debt collector they could take further action, such as pursuing a County Court Judgement.

It is best to try and come to an arrangement, such as paying off your debt in instalments rather than all at once.

Don't agree to pay larger sums than you can afford as this will lead to more problems in the future.

You can contact a debt advice charity such as StepChange, Citizens Advice orNational Debtline for guidance.

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