CCPC Raises Concerns About ‘Buy Now, Pay Later’ Schemes
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What is the main topic discussed in this episode?
As it's Wednesday, Charlie Weston, personal finance editor with the Irish Independent is with us for our weekly personal finance spot.
Charlie, talk to us today, please, about buy now, pay later schemes that are popular with many retailers and indeed many consumers, but may be working more to the benefit of the retailers than to the consumers.
Well, if you want proof of that, Matt, it's in a very simple fact. If you are offering buy now, pay later credit, which essentially is what it is, retailers will pay you to provide it in their store or online. So it's actually the retailers are seeing such a bump in sales that they actually pay the buy now, pay later companies to provide that service on their websites, their online purchasing or in their stores. Essentially, you're buying a product. You pay the first installment for the product or service. you pay that and the rest is essentially given as a short-term loan. So it's a form of credit, according to the central bank, and that's why it's regulated by the central bank. So there's no interest charged or no administration fee as long as you make all the payments over there.
It's usually about 60 days if you make the payments you've signed up for. But if you don't, you're talking then administrative fees. You're also possibly talking unpaid debts and they could send a debt collector after you. And if you run up enough of these, you'd end up with a bad credit score. Now, I'm not saying it's a bad thing, Matt. It's fine for some people and
What are 'buy now, pay later' schemes and how do they work in stores and online?
I don't want to be anybody saying, oh, Fisherman on the radio is very elitist. It's fine for him. He can use a credit card. He has money. Some of us are living week to week and we're on minimum wage. So this is a handy way of paying for things. But some of the research findings from the central bank and the Competition and Consumer Protection Commission are quite startling. The Competition and Consumer Protection Commission was before an Oireachtas committee about two weeks ago talking about this. And actually Klarna and Hum, two of the big buy now pay later firms, are before the same Oireachtas finance committee this afternoon. But what the central bank found in research was People don't understand that this is a form of credit.
They just don't get that. They just think it's a payment plan when actually it's strictly speaking, it's a form of credit. The other problem is it's used by people who least understand it.
Why do retailers pay buy-now-pay-later companies to offer credit?
It's often used by people who have a history of late payments or people who have been refused credit by other providers and there's a low level of financial literacy involved. And people tend to buy more if they use buy now, pay later than they would otherwise be. In other words, Matt, they want something rather than needing it. Here's a handy way of getting it for you and the payments then, you know, you owe payments over a period. So the regulators, I suppose, are concerned it's become so prevalent now. It's become a big part of purchasing, particularly online, electronics, clothes, even fast food, Matt. Deliveroo and Klarna have teamed up and a few spend more than 35 euros, you can make the payment through buy now, pay later.
So it's become quite prevalent. And sometimes the regulators are concerned, Matt, that sometimes...
I'm just staggered by the meal that people would actually pay for a meal on a buy now pay later that they would say you're saying there may be a 40 euro order that they would pay 20 euro now and maybe five euro next week and another five euro the week after.
Yeah, it just seems the ultimate madness. The Journal, to be fair to them, broke this and we had a headline on it when we covered it saying, eat now, pay later. You know, it just seems the ultimate, just a stretch too far, really. Essentially, Matt, yeah, you get a big order from McDonald's, 40 euro, 35 euro plus order. And you put it on the never-never, essentially. You pay an amount up front, a small amount up front, and you pay it then over the next three to four months, and you've consumed it within half an hour of getting it, probably.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–1:41
2
What are 'buy now, pay later' schemes and how do they work in stores and online?
1:41–2:32
3
Why do retailers pay buy-now-pay-later companies to offer credit?
2:32–5:53
4
What are the short-term terms, fees and risks of missing BNPL payments?
5:53–11:36
5
Who is most likely to use BNPL and why does financial literacy matter?
11:36–13:30
Speakers
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