In late June, the UK government declared that millions of individuals will be safeguarded by tightening regulations on Buy-Now Pay-Later credit deals. Lenders would be forced to guarantee loans are affordable in as few words as possible, and laws would be revised to ensure marketing are fair, straightforward, and not misleading.
In addition, the government would broaden the restrictions to include other types of unsecured short-term borrowing that pose comparable hazards to consumers. Using the flimsy excuse that the who field of much needed regulation was tremendously difficult - it is not actually if the issue is given the priority it deserves - the administration stated that it could publish consultation on draft legislation by the end of the year.
Meanwhile, a flood of data continues to arrive in my email, demonstrating the extent to which purchase now, pay later has evolved into a modern debt trap. According to the Australian consumer organization Choice, one in every seven consumers of credit from buy-now-pay-later suppliers had more than 20 loans last year.
According to the Choice poll, customers were utilizing BNPL services to cover critical expenditures, with one in every six using the short-term loans to fund grocery shopping and 14% paying for power. According to Citizen's Advice data in the United Kingdom, more than two-in-five BNPL users borrowed money just to make repayments.
According to the same Citizen's Advice study, 51% of 18-34-year-olds are more likely than 39% of 35-54-year-olds and 24% of those over 55 to borrow money to pay off BNPL debt.
"'Quick hit' spending is a cause of debt for millions of people - mainly younger generations," summarizes Mat Megens, CEO and founder of HyperJar. It's the financial hangover following the dopamine rush of purchasing. "Whether we realize it or not, the duty to pay for things after you've had them has a negative emotional effect since we now have a debt that inhibits us from doing other things in life."
Only last month, the Consumer Financial Protection Bureau (CFPB) in the United States released a study on the Buy Now, Pay Later sector. According to the paper, Buy Now, Pay Later: Market Trends and Consumer Impacts, the sector increased fast during the epidemic, but borrowers may get inconsistent information and safeguards. In 2021, the five businesses examined in the research will have originated 180 million loans totaling more than $24 billion, an almost tenfold increase from 2019. "We will endeavor to ensure that borrowers have equal safeguards, regardless of whether they use a credit card or a Buy Now, Pay Later loan," stated CFPB Director Rohit Chopra.
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