BNPL complaints to FOS increase 36%

Complaints to the Financial Ombudsman Service (FOS) against Buy Now Pay Later (BNPL) firms have jumped 36% over the last three years according to research by Creditspring.

The research found that 220 complaints were made against BNPL firms during 2022, compared to 208 in the previous year and 162 in 2020.

Creditspring says that the rise in complaints made against BNPL firms to the Financial Ombudsman Service comes as people are increasingly reliant on BNPL and other credit products as households struggle with rising living costs. Although the Financial Ombudsman Service is not yet responsible for BNPL complaints, the fact that people are increasingly contacting the service with issues indicates people have nowhere else to turn.

Data from Equifax shows that over 4.1 million shoppers used BNPL products for the first time in 2022 whilst the research reveals that almost a third (29%) of people now use BNPL at least once a month with one in ten (9%) unable to repay the money they owe – rising to 16% for 18-34 year olds.

The Treasury recently announced details of the proposed enforcement powers for the FCA to regulate the BNPL sector as well as an industry consultation.

Neil Kadagathur, Co-Founder and CEO of Creditspring, said “Rising complaints against BNPL firms indicate the desperate need for strong regulation across the sector. However, given it has taken two years to reach this point, we’re unlikely to see the much-needed consumer protections appear anytime soon.”

“Household budgets are set to take a further hit over the next few months with another wave of increased costs from rising water bills to council tax hikes. This will inevitably lead to an even greater reliance on credit products – with BNPL likely to grow in popularity. Borrowers need protection and support now, not in several months or even years’ time when regulation finally kicks in.”

“If used correctly, BNPL offers more flexibility to UK shoppers. However, like many credit options, these products are offered or promoted in a way that encourages people to use them recklessly. If people use BNPL for multiple purchases at once, in a couple of months’ time the total repayment amounts due can rapidly spiral out of control. Borrowers urgently need support now so the onus is on lenders to ensure that they’re educating borrowers over credit the risk, protecting borrowers from debt and lending more responsibly with stringent affordability checks.”