'Buy now pay later' schemes pose potential risks to consumers (Picture: rupixen)

‘Buy now pay later’ services being exploited by fraudsters, warns Association of Cycle Traders  

The Association of Cycle Traders has warned that ‘buy now pay later’ services are being exploited by criminals. 

Schemes that allow consumers to take home products and pay at a later date have proved hugely popular for younger consumers, but are also somewhat controversial as they pose potential risks to buyers. 

In an update to its members the Association of Cycle Traders (ACT), the largest cycle trade organisation in the UK, shared a warning that criminals are exploiting weaknesses to steal items through buy now pay later (BNPL) schemes. 

Martin Rehak, CEO and co-founder of fraud detection start-up Resistant AI, said that many BNPL companies don’t carry out formal credit checks, instead using internal algorithms to make a decision on a request for a short-term loans.

Scammers are able to steal identities or take over other consumers’ accounts to evade detection, leaving unsuspecting victims with the bill. 

The ACT has previously raised concerns about the “improper” regulation of BNPL providers and the potential risks they pose for customers. The organisation is also keen to highlight the differences between BNPL and retail finance, which sees customers may repayments generally over six to 48 months, with full affordability checks and hard credit searches being carried out, whereas BNPL are short term loans with zero interest, making them exempt from the normal financial regulations.  

Last month, the Government launched a consultation on potential BNPL regulation, seeking views from the public, retailers and lenders before considering further regulating the emerging industry. 

Debt charities like StepChange have warned of the risk BNPL could pose to consumers, calling for the protection of customers to be put first and foremost in discussions about regulation. 

BNPL is a popular option amongst Gen Z and Millennial shoppers, letting them split payments at checkouts or pay 30-days later interest free.

However they also contribute to growing levels of debt, with more than 70 MPs raising their concerns. 

MoneySavingExpert.com founder and TV presenter Martin Lewis has also shared his thoughts on the schemes, saying retail finance “isn’t automatically a bad thing to do” and when done right “it can be a useful tool to help people spread costs.” 

Read more: Santander Cycles offering a 25% discount off annual memberships for Black Friday

In February, an in-depth report into BNPL found that one in 10 customers using the short term loans had existing debt arrears. The report called for BNPL firms to perform affordability checks on shoppers and ensure customers are treated fairly, particularly those struggling with repayments. 

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