Paypal will no longer charge customers late fees when they miss payments on buy now pay later purchases.
The move will affect customers in the UK, US and France amid booming market competition, as the company looks to retain and attract new customers to its services.
The changes will take affect in October with shoppers currently charged a £6 fee for late payments with Paypal’s Pay In 3 product.
The announcement could be perceived as a tactic to attract more online shoppers to its service over competitors such as Klarna and Clearpay.
Paypal won’t charge customers late fees when they miss buy now pay later payments
BNPL services allow consumers to split payments for purchases into installments and have grown globally during the pandemic as many people have turned to shopping online.
There are now several firms offering this service.
If customers miss a repayment, buy now, pay later providers typically charge a late fee if there aren’t enough funds.
These late fees can mount up and in some cases can even end up surpassing the cost of the product or service you originally needed the money for.
Greg Lisiewski, vice president of Global Pay Later Products at PayPal, said in an interview: ‘We felt late fees were hindering the customer experience.
‘Given the massive rise and acceleration through the pandemic of this space, regulators across all geographies are taking notice.
‘We think that is appropriate, and we do think late fees will be, and have been, part of that discussion, and we think being as customer friendly as possible puts you in a better place with regulators.’
This is Money has laid out the late fees other Buy Now, Pay Later providers charge.
If customers miss a repayment, buy now, pay later providers typically charge a late fee
Clearpay = £6
• For orders under £24, this can only be charged once
• For orders over £24 you can be charged this late fee continually, with a cap at 25 per cent of the orders cost, or £36, whichever figure is lower.
Laybuy = £6
• This fee can be charged twice for each individual missed installment.
For example, if you were late paying three installments consecutively, you could be charged £36, no matter what the original amount borrowed was.
PayPal’s ‘Pay in 3’ = £12 (until 1 October 2021)
• If you are late with a payment then you’ll be charged £6, which can be charged twice on each individual transaction. You wouldn’t be charged interest on these fees.
• However, on October 1, purchases from customers in the US, UK and France will no longer be subject to late fees, while the company’s BNPL services in Germany and Australia are already void of late fees.
Klarna = £0
• For its 0 per cent interest products, there are no late fees. So even if you were continually late paying, you wouldn’t incur any late fees.
• However, if you consistently miss payments, Klarna passes your debt on to a collection agency and will charge you to do this.
It has not stated what the fee will be for this, but customers have said they have been charged £12 when this happens.
How to deal with BNPL Debt
This is Money, with the help of Money.co.uk, has compiled some tips on how to deal with Buy Now, Pay Later debt.
1. Make a budget: If you have different types of debt, the first thing you should do is make a budget and use the information within the budget to work out what your priority bills are first.
2. Decide which of your bills to pay first: With so many bills being paid out each month, it can be tricky to know which ones to pay first, even once you have completed your budget.
It’s important to know the difference between a priority bill and a non-priority debt.
An example of a priority debt would be your rent or your mortgage, as the consequences of not paying that could mean you lose your home – this type of bill must be paid before any other debts.
3. Dealing with BNPL debts: If you are struggling to make repayments then there are a few ways you can get debt help for buy now, pay later payments.
Some brands offer payment holidays and revised payment schedules to help users pay back what they owe.
There are many places that you can seek help and advice with any financial problems including StepChange Debt Charity, Citizens Advice and National Debtline.
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