Buy now, pay later – when you’ve sent it back?

Trying to get a refund has been like pulling teeth for many people over the past year. From cancelled holidays to parcels that have gone ‘missing’, or simply not being acknowledged as returned, you can be sure at least one person you know has at best found getting a refund a hassle.

But what if you’ve bought something on a ‘buy now, pay later’ credit arrangement? It should be logical to assume that if you return it then not only should you get that refund, you certainly shouldn’t still be seeing installments disappearing from your bank account for something you no longer have, or being told you still have to pay for it.

According to many customers complaining through Resolver about finance or ‘buy now, pay later’ arrangements, apparently not.

Of the more than 17,500 complaints Resolver has seen about ‘Buy Now, Pay Later’ credit arrangements, more than one in 10 referenced issues when returning items. Examples include consumers:

• Being “chased” for payment despite items being returned and accepted by retailers – “I returned these items but they are still wanting the money”;
• Being charged late payment fees for items that had been sent back – “They have been…charging late payment fees when I didn’t pay for the items returned but still took the money at a later date”;
• Others having paid the instalments in full to avoid penalties but awaiting a full refund – “I have returned part of my order but have still not received my refund”; and
• Consumers receiving only partial refunds – “[I] returned all three items and only received a refund for two items”.

There were also incidences of when, if customers did make contact with either the retailer or the BNPL provider, they were told to contact the other party, leading to uncertainty over who was responsible for sorting out the issue.

What is ‘buy now, pay later’ credit?

Buy now, pay later credit (BNPL) is one of the oldest forms of credit available to people in the UK. It emerged – and still exists – through catalogues and was popular among high-street (and online) retailers who realised they could incentivise shopping by splitting the payments of items into instalments, often with an interest-free period.

The rise of online retailers and emergence of new retail models has now meant this form of credit has been ‘reimagined’ and repackaged. It’s now often promoted as more of a lifestyle choice, so you can claim that item as yours but pay for it in instalments, with the promise of only paying the price tag if you paid on time, all the time. More commonly, the financial arrangement is through another provider, with Klarna and Clearpay being two big names in this space, rather than directly with the retailer.

The ‘returns and refunds lag’ as a more specific issue has been cropping up consistently – with perhaps unsurprising spikes during the main lockdown periods of 2020 and this year.

We asked three of the main providers offering BNPL as a third-party through retailers and services – Klarna, Clearpay and Laybuy – for their take on the issue of consumers still being charged, or chased, for payment of goods they’ve sent back to retailers.

Klarna insists that it is working on ways to improve the refund process to make it “quicker and easier for consumers” and encourages any consumers with concerns to contact through its app, email, phone or text. Its spokesperson acknowledged that the process currently takes time while the retailer or the customer has to provide evidence that a refund is due.

Newer entrant to the market LayBuy said it offered a range of options to customers struggling with repayments or refunds, encouraging customers to submit an online help request. But it confirmed to us that until a merchant approves the refund “customers are liable for any outstanding payments to Laybuy”. The provider added that “refunds via Laybuy are subject to each merchant’s refund policy. It is important customers ensure they are happy with a merchant’s own terms and conditions before purchasing from them, and that they contact the merchant first should they wish to dispute a matter”.

Meanwhile, a Clearpay spokesperson told us: “We reserve the right to end merchant agreements if we believe they have breached consumer law or we feel they have not handled a customer complaint in a legal way. We take the protection and safety of our customers extremely seriously and encourage users to contact our customer service immediately if they are concerned about a retailer.”

Buy now, pay later credit: the span of complaints

Other complaints made to Resolver about ‘buy now, pay later’ arrangements over the past two years include:

• Payment and repayment issues;
• Incorrect charges; and in a small number of cases; and
• Fraud – specifically BNPL accounts being opened in customers’ names without their knowledge.

Regulation under the Financial Conduct Authority umbrella has been confirmed and is on the horizon for interest free ‘Buy Now, Pay Later’ credit services. A big change for consumers is that there will be more stringent screening around whether they can genuinely afford to keep up payments, which previously wasn’t required. Given the types of retailers that were likely to offer this option to pay, mainly those selling non-expensive fast fashion, individual transactions may not likely have been that high, but BNPL arrangements are not reported on credit files, so it is easy for consumers to take out multiple agreements.

The move will also mean that consumers who get no response or no resolution to their issue will be able to escalate their complaints about their BNPL arrangement to the Financial Ombudsman Service – previously this was not possible. But while this is of course positive, Resolver is concerned that with a number of complaints concerning the transactional process – including the return and refund lag that is apparent – the blurring of ‘how to shop and pay’ between retail and finance paves the way for questions, and debate, around which side – the retailer or the BNPL provider – is truly accountable for the fair treatment of consumers throughout the transaction process.

Our complaints data shows that consumers are bearing the brunt of responsibility for actually getting these procedural and transactional issues sorted – and in the age of automation, for a process described as making online shopping ‘simple’, this is not acceptable.

See what Resolver CEO Alex Neill thinks should be done to make BNPL a process that shoppers can use with confidence, without concern.