the government's being urged to do more to protect customers. we need to see regulation implemented urgently to bring it in line with any other kind of credit product. as buy now, pay later booms this christmas, is it fuelling a new debt crisis? this is a serious financial - product with strings attached, and if anything goes wrong, i it could come back to bite you. it's estimated that 15 million of us are buying now and paying later, spreading the cost of a purchase over weeks or maybe months. the biggest name in the buy now, pay later world is swedish company klarna. it's valued at £34 billion and has 90 million customers worldwide. i'm one of them. i've used klarna quite a few times and, for me, it's been great. i bought two tops and a pair of sandals, and i chose to pay later. if you're nearing the end of the month and you're waiting on payday, it gives you the opportunity to buy things that you want or need, and delay that payment until a time when you know that you're going to have the money. last year, in the uk, buy now, pay later spending tripled to £2.7 billion. so, we've seen the users of buy now, pay later since the start of the pandemic absolutely explode. we were stuck at home. online shopping was the kind of go—to, and the only way actually that we could actually buy many items. out of lockdown, the buy now, pay later spending spree continued. i'm on my way to see mike in north london. he's a 26—year—old teaching assistant who's been using buy now, pay later for two years. so, these are your recent purchases? yep, this is...a fewjackets from topman. my khaki jacket from zara. jacket from h&m. anotherjacket from topman. cargo trousers from zara. i've got another cargo trouser from bershka. so, was all of this purchased using buy now, pay later? yeah, all of them. buy now, pay later is mostly used for online shopping. mike uses it to get the clothes he wants straightaway. he doesn't have to wait until he has the cash to pay for them. if you didn't have the option of splitting it, would you always spend that much money on clothes? um, i probably would've found it hard to purchase that solely, with those kind of prices. it would have been very hard for me to do it. instead of paying the full cost up—front, it's typically broken down into weekly or monthly repayments. it's interest—free credit with no fees, providing mike pays his instalments on time. you can pay, like, £10 this week, and then £10 the next week. it's less of a shock to the system than, i don't know, going to a shop and buying something, and then the total being £100 and something quid. that's what makes you want to use it more. i think it's like the psychology of it. it's not a big sum. when it's like staggered, and it's like smaller payments, small amounts, itjust means that, like, you're not having that feeling of, like, i shouldn't have bought that. most buy now, pay later companies advertise on social media. iona bain is a personal finance expert. these firms are actively targeting the younger market. they are actively trying to normalise the use of buy now, pay later among young people. if we take klarna as an example, everything about their marketing strategy screams millennial. they have this very instagram—friendly colour scheme, as you can see here, lots of lovely pinks. the language that they use is very down to earth and relatable. they use phrases like, you know, "no drama, just klarna" and "shop like a queen." and they realise that buy now, pay later can be marketed as a way to access that fun, more glamorous, more glamorous lifestyle. instagram, twitter, tiktok, facebook —| they definitely know how to - market to a younger generation. you're going to see it on social media, there's adverts everywhere, adverts on youtube constantly. billboards when you're out, it's just everywhere. the genius of buy now, pay later is that it makes you think that you can have it all now. the problem is, if you are being encouraged to buy more than you can afford, that puts you onto a very slippery slope where you then think that credit is the way to extend your spending. itjust felt like it was a really easy option. we would just go online, buy something _ and, you know, get that free serotonin from it. i like, probably half of my wages go on spending clothes and buying clothes. i was literally buying things because i was bored, i was buying things when i was sad. global data company equifax has analysed the buy now, pay later market. it looked at the spending records of more than 90,000 people and found that nearly 30% of all 20— to 30—year—olds in the uk are using buy now, pay later. because the service was always available, i would buy things even if it was... i had no money left. in terms of, like, my relationship. with buy now, - pay later services, i think it probably is a little bit out of control. - there'd be months where i'd spend, like, £200, £300, maybe £400 on klarna. i couldn't really go, like, a fortnight without making orders. we asked klarna, clearpay and laybuy — three of the most popular buy now, pay later companies — for an interview. hi, gary, nice to meet you. oh, hi, ellie. only laybuy, which is based in new zealand, agreed. this alternative payment method is going to see a rapid adoption by people who no longer want to use a credit card, and they want an access to an interest—free product that gives them flexibility to live the life they want to live. buy now, pay later is boosting the fortunes of some retailers hit hard by a fall in high street sales and then the pandemic. both klarna and clearpay promise retailers they can increase sales and total spend. i'm just having a look at klarna's youtube channel, and they've got a video here, which is aimed at retailers, which says they can increase purchase frequency by 20% and increase order values by nearly 70%. and it's notjust them. on clearpay�*s website, they have got a whole section for retailers where they say they can drive sales by 20% and increase the average order value by up to a0%. research also suggests that buy now, pay later shoppers spend 51% more on clothes than those paying up—front. it's all about the customer thinking they can afford what they're about to buy. a lot of times, people will put stuff in their basket. they'll get to the checkout and then they'll go, "oh, that's the total? i'm not going to pay that." and then they abandon their basket. and that's the retailer's nightmare. whereas if you have something like klarna as an option, people will say, "oh, i can buy now, pay later, i'lljust get it now." so, it works for the retailer. the british retail consortium says that buy now, pay later agreements help "many consumers manage their personal finances" and that "their interest—free nature "offers additional benefits "over some other payment options." so, what's in it for the buy now, pay later companies? most of them take a cut from anything they help the retailer to sell. the more that's sold, the more some companies make. the main revenue streams for buy now, - pay later providers is through the fee - that they charge retailers, so a cut on the percentage of the order value. - they're providing you with the credit, and they get paid by the retailer for encouraging you to tick that box and go ahead with that purchase. the buy now, pay later industry says making money from retail sales means they don't have to charge their customers interest. i think it's really important to say that _ buy now, pay later- is by no means all bad. i've personally used buy now, pay later products, as i thinkl the banks have had it good for a long time. overdraft fees, _ expensive interest and so on. so, i think it's refreshing that we've got _ some innovation in the market. i think for me, itjust comes back to the question of — i where's the protection - and where is the counterbalance to make sure that young people, whose first interaction with credit, _ will undoubtedly- be buy now, pay later, to make sure that there is sufficient protection i and information for them i to make the right decision? when these buy now, pay later products first hit the uk credit market in 2014, they were an instant hit with fast—fashion retailers. now, around half of all major online stores offer buy now, pay later. so shoppers can buyjust about anything they want this way. hi, tamsyn. oh, is he asleep? yeah, he's asleep, but come in. thank you. mum—of—two tamsyn lives in northampton. she's buying essential family items through buy now, pay later. i've got an 8—year—old as well, so she's quite expensive, with school uniforms and everything. backpacks, like, stationery, things like that, i've used buy now, pay later for them. how helpful is it for things like that? i don't have that money sitting in the bank, ready to use, so it's been so helpful. tamsyn�*s on maternity leave, so this christmas, has less cash to spend. she's been turning to buy now, pay later more and more. i started buying probably a month or so ago, so i've already got quite a lot. and, yeah, every time i log in, i see summat. i'm like, "ooh, that looks nice. i'lljust get that." how much does christmas tend to cost you, in general? definitely a couple of hundred, if not more than that. i go out — i go all out at christmas, you know, i do spoil my children, because why not? she signed up to six buy now, pay later companies and takes me through her accounts. i've spent £73 on there and i've paid off 20, so i've still got £54 to pay back on there. i've got that one coming out, that's tomorrow. yeah, so that one, and then the next one is every two weeks. how much more manageable is it for you to be able to pay a tenner every week, or two weeks, as opposed to 60 quid in one go? sometimes, even if i did have that £60 available, i'd probably still choose to do it in instalments, just because it is more affordable. right now, she's keeping up with repayments, but is aware how easy it would be to slip into debt. if you're using a few, it is easy to overspend, because you might have £200 limit on one brand, but if you've got six of them, you know, yeah, i think it's quite dangerous if you don't keep on top of it. in the first eight months of this year, its estimated the average level of personal debt per person in the uk rose to more than £17,000. simon kendall helps people with problem debt in leeds. what are some of the main issues that you are seeing around debt in the area? it's the credit cards, it's the catalogues, the loans. things like water bills are a genuine concern at the moment. people are struggling financially. he says his clients are increasingly leaning on buy now, pay later to help make ends meet. the industry's gone absolutely massive and there's been a big boom. i would say about 30—40% of my clients have used it in some form, whether it's on this short—term, you know, quick—fix sort of thing, or whether it's small, long term and it's a regular thing for them. i'm seeing probably more increase in families using it to get by, 30— to 40—year—olds. according to simon, many of his clients are already heavily in debt before they sign up to buy now, pay later. he's agreed to take me through one of his cases — a mother of four. so, the client's in around £13,000 worth of debt. your rent, your council tax, gas and electric, so that's about half of it. and then we've got a debt collection agency that make up about 6,500. but in that 6,500, there are buy now, pay later products of £1,500. oh, wow. so, this client was in more than ten grand's worth of debt and was able to get £1,500 in buy now, pay later? yep. it's easy for them to do. and he says this client is not alone. how is adding buy now, pay later into that mix exacerbating the issues around debt? so, clients aren't coming to us because of buy now, pay later debts — that's usually the tip of the iceberg. there's normally some underlying issues — payments to buy now, pay later products are making their financial situation even worse. some of these clients should never have been able to apply in the first place. until now, i've really been on the fence about my feelings towards buy now, pay later because i do see its benefits, and i think that it can be a huge help for a lot of people. but speaking to simon really puts into perspective just how dangerous it can be as well. the fact that one of his clients was already in ten grand's worth of problem debt and was able to take out £1,500 from buy now, pay later is of huge concern. in september 2020, the financial conduct authority ordered an urgent review into buy now, pay later. it was published earlier this year and confirmed that this type of credit can add to people's existing debt burden. when we looked at data from one major bank, and we looked at their customers who took buy now, pay later, one in ten of those customers were already in arrears when they took on a buy— now— pay—later loan. and that for us is really good evidence that at the moment, that proper affordability isn't being checked at this point in the market. instead of at that point - knuckling down, paying off, you know, my debt and kind of sorting myself out — - i essentially turned _ to buy— now— pay—later services instead. when i started first using klarna, it was out of necessity because of the fact that i didn't have the credit card available to me because at the time it was maxed out. so, pretty much, when i started using buy—now—pay—later services, i already had credit card debt. i had about £1,500 on one credit card, another for 500, and an overdraft for 1,000. so, all in, it was about £3,000. unlike banks or credit card companies, buy—now—pay—later firms don't have to check their customers�* full credit histories. at the moment, a lot of them make what are so—called soft| credit checks, but they don't generally record data - with credit reference agencies. and what that means, in turn, is the money that you borrowl through buy now, pay later. can't be seen either by other buy now, pay later providers or by the mainstream creditl market so you can have people being lent money they simply. can't afford to repay. i decided to put some of the buy—now—pay—later companies to the test. so, i already use klarna. so, i'm going to sign up for a few other ones and see how easy it is to get credit with them and what kind of things they ask for when you sign up. it's asked for my name, my date of birth, and my address. ok, so i've signed up to five different buy—now—pay—later services now and i've not been asked a single question about my finances. they did make me verify my id. i had to scan a picture of my driving licence, so, let's see what happens when i try and spend some money. i've just bought something on laybuy. i have got a shopping bag for £540. and they've all given me different limits, so clearpay is by far the highest. they've given me £450, laybuy�*s giving me 120, as is zilch. in hardly any time at all, i'vejust spent more than £1,700 using buy—now—pay—later services. and they didn't ask me one question about my financial situation, or whether that was affordable. some of them set a limit based on what they thought i could afford, but that didn't seem to take into account the fact that you can use multiple of these services at once. but i've got more than a grand to pay back over the next few months. and i think that debt could become really overwhelming. i immediately cancelled all my orders, so i don't have to repay anything. buy— now— pay—later products aren't regulated in the uk, l and that means that people - who borrow with them don't get the same kinds of protections that they do with mainstreamj credit products. in the regulated market, - when you want to borrow money, the lender is required i to perform what's known as an affordability _ assessment and that will look at what are your other outstanding debts. . what's your income? and after you take on this . new loan, would you still be left with enough money for the kind of basic- essentials of life like your. housing, food, kids' school uniforms, those kinds of things. | the review found that there - was an urgent need to regulate, and the treasury and the fca both accepted that finding. from the review. we participated quite heavily in the woolard review and we were supportive of the recommendations that have subsequently been made, which revolve around credit and affordability checking, and continuous credit reporting. we are supportive of the premise that the regulation needs to be appropriate for the utility of the product. our average transaction value is only £74. we're not talking about lending thousands of pounds to individuals — they are small transactions. but ten months on, buy now, pay later remains unregulated. the financial conduct authority which ordered the woolard review says it's vital the law adapts as the market innovates and says, the government says it's "considering the most effective way to bring these products into the scope of regulation and is progressing this work as quickly as possible." time is ticking. another christmas is about to go by without regulation. shoppers will be using buy now, pay later to do their christmas shopping. but we need to see regulation implemented urgently to bring it in line with any other kind of credit product. buy now, pay later continues to grow. using zilch is super simple. this company offers a service for grocery shopping. unlike others we let you know exactly what you have to spend beforehand. i'm just on the zilch app and it feels quite different to some of the other companies. so, they have less of a focus on fashion and they have a whole section dedicated to groceries. so, you can use it to pay for your food at asda, tesco, iceland, aldi, morrisons. i would never have associated buy now, pay later with doing a food shop. you pay the first 25% up front. zilch works a bit differently to other companies. you pay a quarter of the total cost of the order upfront and then pay the rest in instalments. i met one woman who's been using zilch for the past six months. she's a mother of two and has asked us not to show her face. you know it would be bread, milk, nappies. you know, fruit, vegetables, meats, packed lunch stuff. it's a constant, sort of, cost. so, yeah, it is purely forfood shopping. she says sometimes buying now and paying later is the only way to put food on the table. i will go out and sort of use that for shopping mid—month for things that we need. it's sad state of affairs when you have got to rely on that to be able to pay for food for my children and keep everyone happy. you're constantly, you'd pay one off, and then you need to use it again mid—month so you just keep using it. it's just a cycle that goes on and on and on. so, you know, unless a miracle happens and i win the lottery, i think i will be forever paying. zilch says, "today's consumers are driven "by convenience and will choose to shop and pay in ways that "are easiest and most affordable." it says it "combines open banking with soft credit checks so credit "scores are unaffected." so, what happens if you fall behind with your buy now, pay later repayments? a survey of 2,000 buy—now—pay—later customers found nearly 43% reported missing one payment. mike couldn't keep up with his instalments. it started from, like, let me see what that's about to then using it every now and then, and to then using it on a regular basis and to the point where, like, iwas, like, racking myself up debt with them. was that money that you were able repay? did you have that money? no, not straight away, no. when he kept missing his payments with klarna, he says they suspended him. i was able to pay off, but because i wasn't good with my repayments, i wasn't allowed to use klarna anymore. how late were your payments in the end? like a few months late. he was still able to sign up with two other companies, clearpay and laybuy. i still needed a way to use the services. and did you move straight on to them as soon as you got banned from klarna ? yeah, soon as i wasn't allowed to go on klarna, so, yeah, i moved on straight away. he fell behind again and says laybuy charged him late payment fees before threatening to refer him to a debt collection agency. i am still struggling to keep up with repayments. i'm trying to figure out a way to keep up with them. i got a message from them saying they're going to, like, pass it on over to debt collectors. so i've got to pay that off when i get paid. for most people buy now, pay later can be a convenient way to spread the cost of their shopping. but for those who struggle to keep up with the repayments, the consequences can be serious. if you pay back what you owe on time, then you shouldn't have any problems with buy now, pay later. the problem is that lots of younger people end up not being able to pay back what they owe on time, and with some lenders, they will charge late fees. and these can stack up. and then as time goes on, you will be referred on to a debt collection agency, and they can use any means necessary, really, to get you to pay back what you owe. now, younger people don't understand that in the long run, all that can really influence their credit rating, and that's a crucial number that they need in order to borrow money in the future and get affordable credit in the future. so, if they harm their credit score at a young age, they're really harming their long—term financial prospects. laybuy says it support customers who may be facing hardship and offers payment holidays. klarna says the average age of its uk customers is 33, its "interest and fee—free short—term credit products are helping keep people out of debt", and the credit it offers is linked to "a specific purchase with clear repayment plans and affordability checks. . . " it says it has "spending limits in place" and restricts services if payments are missed "to prevent debt building up." clearpay says traditional credit checks don't work for "small everyday purchases". instead, it says, "we build trust with our customers, "they start on lower amounts and these limits only "increase when we see ongoing positive payment behaviour." i think it is important that we don't simply demonise it as a product. it clearly has its uses and there are people for whom it is appropriate. but it does need to be affordable and it does need to have the wider regulatory protections around it for when things go wrong. while the government continues to consider what regulation of buy now, pay later might look like, some customers will continue to take on debt they can't afford. i just feel like it's everywhere you look, and you can't really escape from it, which is why it is easy to kind of fall into the trap, i would think. if you needed to buy something desperately, like you needed it, rather than you wanted, and you had that option, then absolutely take it. butjust be careful, in a sense that, don't spend over your means. it's you that has to pay for it at the end of the day. if i could go back to my younger self, when i started using them, i would just say make sure you understand what you're getting yourself into. think about future you. think about if you really need this. hello, mild night out there, high pressure is also building which means that over the next few days the weather is expected to be settled. it is going to be mild, often cloudy, with a bit of sunshine every now and then as well. so this is what it looks like through the early hours. we have a weather front in the north—west of the uk, so there is some rain about, first thing in the morning, but the rest of the country is drive. very mild first thing in the morning. 10 degrees in the south, may one or two other spots colder than that, but certainly crossed freely across the uk. the cloud club on wednesday will vary considerably. some of us will have plenty of bright or sunny weather, others will be stuck underneath the cloud. it should be cloudy across northern ireland with spots of rain, perhaps south—western scotland and the lake district, also figure cloud further south but notice around northern wales, the midlands, eastern england and northern scotland, it should be sunny. by by. this is bbc news. most countries probably have omicron cases and it's spreading faster than previous variants and the world health organization warns the world to prepare. even if omicron does cause less severe disease, the sheer number of cases could, once again, overwhelm unprepared health systems. the noes, 126. here in london, despite the pm claiming success, dozens of his own mps vote against new coronavirus restrictions in the latest blow to boris johnson's authority. a record temperature�*s observed in the arctic.

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