A charity has warned that thousands of young people are being caught out by the backdated interest payments attached to some “buy now, pay later” deals.
Citizens Advice said that the arrangements are becoming increasingly popular among those in their 20s, but individuals who missed a payment deadline were finding themselves in debt.
And it isn’t a case of a few isolated incidents, the organisation said that it had been approached by 24,000 people with catalogue or mail order debt problems.
One example cited concerned a man who bought a laptop for £700 on a one year interest-free deal. However, when health problems forced him to give up work he ended up missing the final instalment. This left him with a final interest bill which was almost as much as his original purchase.
On average, individuals owed £1,300 and those aged 25 to 29 were most likely to have gotten into difficulties.
Gillian Guy, Citizens Advice chief executive, said: “Buy Now, Pay Later deals help people spread the costs of catalogue purchases but it is vital customers understand what they are signing up for and what will happen if they fail to repay on time.
“Clearer explanations by catalogue firms when advertising these deals will prevent people being hit with shock bills that could send them spiralling into debt.”
The charity is now calling on the Financial Conduct Authority (FCA) to ensure that providers display potential charges clearly and make the consequences of failing to repay more apparent.
A FCA spokesman said: “We will look across all high-cost products to build a full picture of how these are used, whether they cause detriment and, if so, to which consumers.”
Any proposals to tighten up on these types of deals are expected to be published next summer.