Over-long terms and conditions prompt more fears over ‘buy now pay later’ debt

Did you really spend 60 minutes reading the small print before you clicked ‘accept’?

Felicity Hannah
Wednesday 07 April 2021 07:00 BST
A US survey carried out by Deloitte found that 91 per cent of customers agreed to terms and conditions without reading them in full
A US survey carried out by Deloitte found that 91 per cent of customers agreed to terms and conditions without reading them in full (Getty/iStock)

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Louise Thomas

Louise Thomas


Perhaps it is the internet that’s made it so easy to scan terms and conditions, or even to click ‘accept’ without actually opening them.

After all, how many of us really, truly read the seemingly endless small print relating to the social media websites we use and the services we buy?

One recent study carried out by PR agency Reboot Digital showed that the terms and conditions on dating websites typically take 58 minutes to read, while those for social networking sites take an average of 37 minutes.

The Independent recently examined the terms and conditions of Facebook and other websites, and found that the process, together with some of the language used, presented a barrier to real understanding.

You’d hope people would be particularly careful in scrutinising the terms of any financial contracts they sign up to.

However, a study by the comparison website NerdWallet showed that the average time taken to read the documents for 11 buy now, pay later services averaged out at more than 36 minutes each. One of the market-leading providers had terms and conditions that would take the average reader as long as 57 minutes to read.

One particular issue is that buy now, pay later services are particularly popular with younger shoppers. And those younger shoppers are also much less likely to read the full terms of any services they enter into.

A survey carried out in the US by Deloitte found that 91 per cent of customers agreed to terms and conditions without reading them in full, but that number jumped to 97 per cent for people aged between 18 and 34.

Services offering delayed payment terms are also rocketing in use. Research from Worldpay shows that they are the fastest-growing online payment method in the UK, predicted to account for 10 per cent of online shopping spending by 2024 – effectively doubling in size from last year.

Given that buy now, pay later services are often used at checkout both online and in shops, it seems very likely that a lot of customers are only scanning, or even skipping entirely, the accompanying small print.

And that’s a problem.

‘There is a risk’

John Ellmore, operations director at NerdWallet, says the length of many of the terms and conditions or privacy notices means that we regularly simply scan and click – and that is concerning, even if it doesn’t cause problems for most people.

“With the length and complexity of terms and privacy notices, we shouldn’t be surprised if many people click ‘accept’ without reading or understanding exactly what they’ve agreed to,” he warns.

“This may not cause problems for most people, but there is a risk that a customer could agree to something they aren’t aware of if the crucial piece of information is buried in a mass of text.”

Nerdwallet’s analysis shows that many of the buy now, pay later providers score low on clarity as well, potentially adding to the time spent trying to understand the terms and conditions – and possibly putting more people off doing so, as well.

Debt-based products like these are particularly important to understand, given that their popularity is booming. New customers are signing up all the time, and using their services regularly.

Last year 5 million people in the UK used some form of buy now, pay later service, and now the Financial Conduct Authority (FCA), the UK’s financial regulator, will be given powers to regulate the sector.

‘Plain English’

The FCA demands that all businesses providing financial products use plain, intelligible language that is easily legible as part of its rules around being clear, fair, and not misleading.

When it comes to any kind of debt-based product, like a buy now, pay later service, it is particularly important that customers understand what they are accepting.

That’s something that the big providers, like Klarna, say they are addressing in relation to the user experience of delayed-payment terms.

Alex Marsh, head of UK for Klarna, the most popular buy now, pay later company in the country, says: “Klarna sets out how much you’re spending, when it’s due, and your responsibilities in plain English at the checkout, so the information you need is crystal clear before you click buy – as well as providing full T&Cs.

“We follow this up with regular reminders and information throughout the payment period.”

Ellmore says: “The fact that some providers have double the number of words in their terms and privacy policies [compared with] other providers shows that a lot more can be done to make these documents more readable and consumer-friendly.

“Improving the accessibility of the documents could encourage people to read them in full, helping them to better understand their rights and feel more confident about the service they are using.”

Fintech firms have worked hard to innovate and to make financial products far more accessible and frictionless than they have ever previously been. Perhaps it’s time for some innovation around expressing the terms and conditions as well.

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