BROKE Josh Stinchcombe can’t afford Christmas presents this year after falling into the “buy now, pay later” debt trap blighting the nation.
The 21-year-old, who is down to just £20 in his bank account, put £200 on the credit service Klarna to buy a suit for an IT job interview.
But he could not afford to pay it back and had debt collectors chasing him.
It is a familiar story, with seven million of us using buy-now-pay-later to fund Christmas after a Covid-hit year, according to Compare The Market.
Josh, whose debts totalled more than £2,000 including loans, believes celebs such as Love Islanders Anna Vakili and India Reynolds should feel guilty for promoting Klarna while their fans get into debt.
He said: “It’s Christmas but I’ve told everyone they’re not getting anything from me this year.”
Josh feels the Love Island stars are “glorifying getting people to borrow more than they can pay back.”
One 23-year-old woman who racked up £12,500 of shopping debt said: “I felt I had to keep up with designer clothes and handbags to look good on social media.”
This week, consumer experts at Which? called for firms such as Klarna to be regulated like banks.
Klarna has ten million UK customers, bagging three million since lockdown in March.
More than half of 18 to 24-year-olds use some form of buy-now-pay-later service.
Many high-street stores offer the service too, including Marks & Spencer, H&M, Uniqlo, River Island and H Samuel, as well as online shops such as Asos.
Small stores, garden centres and even hairdressers are getting in on the act too.
Retailers love it because shoppers spend up to 68 per cent more if they choose to pay later, market leader Klarna says.
Klarna is the biggest shopping phenomenon to come out of Sweden since Ikea but it is creating even more of a headache than making flatpack furniture.
Its slogan boasts: “Buy now and pay later, so you can get what you love today.”
But if you don’t, can’t or forget to make all payments within three months, your debt is referred to a collection agency.
One in ten buy-now-pay-later customers are hit by late fees, according to Which?.
Klarna does not charge fees, but similar products by Clearpay come with late fees of up to £36. PayPal charges £12.
Josh, from Gloucester, said: “I was 19 and wanted to look smart for a job interview, so I put £200 of clothes on Klarna.
“They could see I had a bad credit score but — irresponsibly — offered me money.
“I got paid three days ago and I’m down to £20 in my account.
“Even Covid and Christmas should not persuade you to take credit unless you are certain you can pay it back.”
These latest buy-now-pay-later schemes allow customers to take out credit in one click without a full check, unlike with credit cards or loans, which need complete assessments to determine if a person is able to repay.
Klarna does a lower-level credit check and says failing to pay back debt does not affect a customer’s credit rating.
But critics accuse Klarna of throwing money at young people who cannot get other credit, starting a debt spiral blighting their adult life.
Some customers say they did not even realise they were signing up for credit when they clicked on the Klarna logo, thinking it was a payment provider like PayPal.
Others say they did not receive reminders about payments or insist that Klarna would not return phone calls.
Buy-now-pay-later is currently unregulated but the Financial Conduct Authority is planning a crackdown.
A spokesperson for the Financial Wellness Group, which advised Josh on his debts, said: “Buy-now-pay-later products are targeted at young consumers at the point of purchase, with little time to consider the pros and cons of paying later.”
Alice Tapper, who runs the #KlarNAA campaign, added: “Christmas shoppers using buy-now-pay-later are storing up trouble for the New Year.
“A perfect storm of problems is being created by the buy-now- pay-later mindset, the economic climate and lack of regulation, meaning there is no guidance on how products should be advertised and little consumer protection.”
Asked about the risk of customers getting into spiralling debt, a Klarna spokesman said: “We take this very seriously, especially during Covid.
“Every time a customer chooses to pay by Klarna, we do a soft credit check, determining (their) credit-worthiness.
“For customers who do not pay within the timeframe, we communicate to remind them and if the debt remains unpaid for several months, turn it over to debt collectors to contact the customer.
“Interest or fees are never added. Your credit score will not be impacted, even if you fail to pay on time.”
