Rise in buy now, pay later ‘exploiting people with mental health issues’ during lockdown
11th November 2020

SHOPPERS suffering mental health issues are being pushed into debt during lockdown because borrowing money when buying online has become so easy.

The rise of buy now, pay later payment options at checkouts on many websites means it can now take just one click to make a purchase.

But people with a range of mental health issues often struggle to control their spending, and the simplicity of online shopping could push them into debt a leading charity has warned.

The Money and Mental Health Policy Institute, founded by Martin Lewis of Money Saving Expert fame, has found that buy now, pay later schemes are encouraging people with poor mental health to spend more than they intend to.

And pushy tactics from retailers like marketing emails and personalised recommendations also increase the risk of overspending.

Buy now, pay later lets shoppers buy items on credit and pay for it later on, usually around a month after but this can vary – or you can decide to spread the payment over several months.

5 ways to reduce your impulse buying onine

IT’S easy to scroll and spend these days, especially with lockdown leaving us with more time on our hands. Here are some ways you can avoid being tempted.

  • Unsubscribe from emails you get from shops
  • Turn shopping app notifications off
  • Organise all your shopping apps into a folder labelled "spending" and move it as far from your phone's homepage as possible
  • Make a shopping list – instead of buying straight away make a list you can review each week, then you can decide what you really want to buy, or if you really want to buy anything at all
  • Set limits on your phone – on some devices you can make certain apps unavailable at certain times via screen time settings

 

Klarna, Clear Pay and Laybuy are some of the lenders offering buy now, pay later financing, which is available at major retailers like Asos, Pandora, H&M and Halfords when buying online.

More than 3million with mental health issues have struggled to control their spending online, the charity's research found.

Symptoms such as being more impulsive, reduced concentration and low morale are common among those with mental health issues, which are thought to affect one in four people at some point in their lives.

The charity found that more than half of Brits say buy now, pay later makes it too easy to get into debt, and two in five of those with mental health problems say that using buy, now pay later has become harder to resist.

Helen Undy, the boss ofthe Money and Mental Health Policy Institute, said: "Online retail can be a lifeline for people living with mental health problems who may struggle to leave the house, especially during the pandemic.

"But pushy sites and tempting buy now, pay later offers  can cause people to spend more than they can afford, risking both their financial and mental health. 

"This is particularly challenging in lockdown, with many of us spending longer online, bombarded by adverts telling us that the latest new thing will make us feel better.

Help available for those in debt

IF you’re struggling with debt, here are some options you might want to consider

And if you're unsure what the right option is for you, speak to a free debit advice organisation, such as Citizens Advice.

Debt management plan (DMP)

A DMP is an informal agreement so you can stop it at any time and resume the normal debt repayments, or adjust your payments if your circumstances change, like you lose your job.

It ends when you've paid off the debt so it could last for decades.

Many firms charge a fee for the service, either upfront or one that's incorporated into your monthly payments.

If you're struggling due to coronavirus, contact your DMP provider so it can liaise with lenders on your behalf.

Debt relief order

If you're struggling to meet your IPA or IPO repayments, these can be updated if your income changes. You must contact your trustee immediately if this happens.

Equally, if you get a lump sum while you’re paying an IPA or IPO, you may be asked to make a one-off payment from it.

A DRO is way to have your debts written off if you have under £20,000 of debt and no assets.

You have to pay a £90 fee but you don't have to make repayments and after 12 months your debts are written off.

You can't apply for a DRO if you're a homeowner. It will negatively affect your credit score for six years and it may be difficult to get credit during this time and details will be published publically.

Bankruptcy

Bankruptcy is a last resort if there is no other way to repay your debts. It usually lasts a year but it can be up to three years.

A bankruptcy practitioner called a trustee will take control of your assets and sell them to repay your debts.

If you can afford it, the trustee will ask you to make regular payments towards your debts from your income through an income payment agreement (IPA).

If you can’t agree on payment amounts for an IPA, the trustee can apply for an income payment order (IPO). If you don’t meet these payments, the trustee can then apply to extend your bankruptcy.

It is much more difficult to get credit after bankruptcy and your credit rating will be affected by up to six years.

You could lose your house, possessions and some professions won't let you work if you've been made bankrupt.

If you own a business it could be sold and the details of your bankruptcy will be published publically.

You have to pay a £680 fee to go bankrupt.

"At its worst, this can leave people in thousands of pounds of debt, with a single day’s shopping spree causing years of misery."

The charity is calling on retailers to introduce features that help people avoid this debt trap.

This could be tools to manage their spending, such as the choice to opt out of buy now, pay later at the checkout or offering the option to add a cooling off period to their account.

Undy said: “With more people facing mental health problems this year, as we approach Black Friday retailers must take action to help customers stay in control.

"Simple steps, like making it easier for customers to avoid buy now, pay later options, could help people avoid serious financial harm at this difficult time."

It's also asking the regulator, the competition and markets authority, to make sure retailers are not breaking consumer protection laws by pressurising shoppers.

It's not the only one to warn of the dangers of buy now, pay later -debt charity StepChange has warned of its "obvious risks" earlier this year.

Online shopping sprees using buy-now-pay-later schemes left one shopper £1,500 in debt and homeless.

Buy now, paylater app Klarna promises to delay the cost of shopping online so you can buy things that you need without waiting for pay day, but what is Klarna, is it safe and which shops can I use it in?

Over two million shoppers have damaged their credit scores using buy now, pay later schemes, according to new research.

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