‘Buy now, pay later adverts can be as clear as mud’

interactive investor comments as FCA warns BNPL firms about misleading marketing.

Commenting on the Financial Conduct Authority’s warning to buy now, pay later (BNPL) firms about misleading adverts, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Adverts promoting BNPL schemes can be as clear as mud. The worry is an increasing number of people are using such schemes without having a clear understanding of the key considerations.

“Many people are still unaware that BNPL schemes are a form of credit and are guilty of skim reading the T&Cs or simply ticked a box to say they had read them. Customers can be referred to debt collectors and their credit scores could be tarnished if they miss payments.

“While people of all ages are not immune to the allure of such schemes, they are often targeted at younger generations through advertising on Instagram and other social media platforms - via influencers in some cases. The increase in the cost-of-living risks even more people turning to BNPL schemes to help tide them over. You can now buy essential groceries through some BNPL services, which is particularly disconcerting. It is never a good idea to borrow to pay for essentials - it is a shortcut to unmanageable debt.

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“BNPL schemes are clearly giving the regulator a lot to think about. The issues on the table are a reminder of the desperate need for good financial education, in schools and beyond, and most pupils are still not getting enough access to these crucial life skills."

Concerns about BNPL schemes were echoed by Nicola Butler, a maths and finance teacher at Ysgol Eirias, a highly regarded state secondary school in Colwyn Bay, Wales.

Nicola was a winner of the2021 interactive investor Personal Finance Teacher of the Year Awardand she is particularly worried about the rise in BNPL schemes and says: “This is a topic we explore in depth in the classroom – making sure children can look past the glossy marketing and social media presence of these companies and see them for what they are – credit providers, which carry the same risks as any other.

“It is easy to see how the rise in this ‘BNPL’ culture could drive impulse purchases and put people in debt and severe financial difficulties. Indeed, my concern is not just how young people, once they turn 18, might start using these services, but also how they can impact parents and families.”

In December 2021, interactive investor shared an open letter it had written to the Department of Education, alongside the judges of the interactive investor Personal Finance Teacher of the Year Award, calling for a more joined-up approach to financial education. 

In the letter, ii, together with fellow judges, said that: “Financial education is a vital tool in the UK’s recovery, against a backdrop of a cost-of-living squeeze and the impact of the pandemic still being felt economically as well as socially. With the levelling-up agenda a long-term commitment, we ask the government to give personal finance lessons the priority they deserve.”