Catalogue customers hit hard for missing interest free deadlines
Catalogue customers who ‘buy now and pay later’ are being hit with shock fees for failing to pay in full within the interest free period, Citizens Advice warns today.
The charity has helped 24,000 people with nearly 50,000 catalogue or mail order debt problems in the last year - with 70% of the issues related to dealing with debt repayments.
Citizens Advice is highlighting problems faced by customers who take out Buy Now, Pay Later deals. This type of deal allows people to delay paying for items for a period of time - such as up to 6 or 12 months - but if they don’t pay off what they owe in full by an agreed date then interest charges are backdated to the very start of the agreement.
This can leave people with unexpectedly large bills - sometimes costing more than twice the original amount they borrowed.
Citizens Advice helped one man who bought a laptop costing £700 from a catalogue company on a one year interest free deal. He developed health problems which meant he had to give up work, and struggled to pay back the final installment of £150 within the interest free period. He was left facing a bill for interest that cost almost as much as the laptop.
The charity helped another man who bought an £600 iPad from a catalogue company on a year-long interest free deal. He still owed £100 at the end of the interest free period, and was hit with a backdated charge of nearly £700 interest - more than the original cost of the iPad.
Citizens Advice is calling for greater clarity on how catalogue firms advertise these deals to prevent customers being hit by shock charges.
Citizens Advice Chief Executive, Gillian Guy said:
“Missing a payment deadline can make the cost of catalogue borrowing sky-rocket.
“In some cases people have nearly paid back everything they owe but because they’ve run out of time their debts have suddenly soared to double what they originally borrowed.
“Buy Now Pay Later deals help people spread the costs of catalogue purchases but it’s vital customers understand what they are signing up for and what will happen if they don’t 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.”
An analysis of 250 cases where people sought help from Citizens Advice for catalogue debts also revealed common problems such as high fees for missed payments, inadequate affordability checks and poor debt collection methods - including repeated demands for payment from customers struggling with their finances.
Citizens Advice’s analysis reveals that the average catalogue debt of people the charity helps is £1,300. Younger people aged 25 to 29 are most likely to have problems with catalogue debts.
The Financial Conduct Authority is examining catalogue credit as part of its review into the high cost credit market. Citizens Advice wants the regulator to look at the way catalogue firms display the charges people will face if they don’t repay the full amount before interest free periods end on Buy Now Pay Later deals.
The charity thinks that when catalogue firms backdate interest charges to the start of agreements, this should be clearly explained, as well as notice of extra fees that might be added for late payments.
Citizens Advice is also calling on the FCA to extend its price cap on payday interest rates and fees to the catalogue credit market and turn its responsible lending guidance into rules to make sure people can always afford to pay back what they borrow.
Notes to editors
- The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
- The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
- Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
- Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.