Money saving expert Martin Lewis has urged online shoppers to be very careful when using “buy now, pay later” programs.
In recent years, services like Klarna, Clearpay, and Laybuy have offered buyers ways to make multiple monthly payments instead of paying for a one-time purchase.
While undoubtedly convenient for online shoppers as they approach Xmas, they can have a disastrous end if buyers are not careful.
The finance guru likened the programs to “payday loans” on Twitter, before issuing a bigger warning on his BBC Radio podcast “Ask Martin Lewis,” the Liverpool Echo reports.
He said: “There is a regulation that was originally put in place so if you are a gym or furniture store you can offer zero percent credit for one year and you don’t have to be regulated.
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“But what has happened over the last few years is that companies have sprung up and tend to come from highly regulated countries and set up shop in the UK where they are effectively not regulated for that. buy now, pay later.
“We’ve seen it explode over the course of this year… and you always get these options to buy now, pay later at retailers, sometimes people don’t even know they’re opting to buy now pay later.
“And that’s something that worries me more and more.”
Martin added: “My big problem is this, it’s an explosive form of credit that is becoming mainstream very quickly and is unregulated.
“It means it’s not controlled properly and more importantly when things go wrong you don’t have the right to go to a financial mediator so I think I would put a warning there.
“Think carefully, make sure you understand what you are doing when you buy now, pay later.
“Make sure you understand it’s credit, it’s a form of debt – make sure you know the rules or don’t touch them.”
You can find more information on MoneySavingExpert.com here.