Buy now, pay later (BNPL) provider Laybuy says it will begin sharing debt and payments information with credit reference agency Experian from 1st September, in a move which it claims “protects vulnerable consumers by providing other lenders with a much more comprehensive picture about an individual’s financial position”.

Information provided to Experian includes both the amounts owed and payment status, including details on any missed and late payments. This will be made available to other lenders when making credit decisions.

Laybuy Managing Director Gary Rohloff says: “We are committed to being the leader in offering responsible and transparent credit, which is why it is fitting for the company to be one of the first BNPL providers in the UK to start providing payments data to Experian.”

“We don’t want anyone to be taking on a debt that they cannot afford, and that means making sure all lenders have a full understanding of a consumer’s financial situation when considering whether to extend them credit.”

“Providing this broader range of data to Experian will mean lenders can make much more informed decisions about credit by having greater visibility on how a customer is using Laybuy, including their total level of indebtedness and whether they are making their repayments on time.”

“This will significantly improve transparency and means any Laybuy customer who might be facing financial stress, or who has a history of missing payments, will be much less likely to be granted further credit that could add to their financial woes.”

He adds that the move to share data will not negatively impact a consumer’s credit score at this stage because it will be ring-fenced

“It will, however, give consumers who make their repayments on time the ability to build up their credit history. This will make it easier for them to access appropriate credit facilities in the future without the need to take on high-interest and higher-risk debt,” he comments.

“For this reason, the sharing of data with Experian is a win-win for consumers. Not only does it provide better protection for vulnerable consumers, but it also allows those with a limited credit history to build up their credit scores.”

Rohloff concludes: “For many people, BNPL offers a safer alternative to credit cards, providing them with short-term interest-free credit and a structured repayment cycle. But it is important to remember that it is still credit.”

“That is why we have credit checked every new customer since we launched in the UK in 2019, which helps inform the setting of a responsible credit limit and sees about one-in-four applicants declined an account.”

“Today’s announcement sees Laybuy providing even more comprehensive and continuous data about our customers' financial position so that all lenders can make more informed and balanced credit decisions.”

“We have taken this step because we believe it is the right thing to do. No one should be put into a position where they are offered debt that they cannot afford. This will go some way to stopping this occurring in the future and we encourage all other providers to follow our lead.”

Which? warning

Earlier this year, Which? called for stronger safeguards to stop online shoppers from choosing BNPL services to pay for products without knowing the risks.

We conducted in-depth interviews with buy now, pay later shoppers and found many did not fully understand the risks of choosing to pay later at the checkout.

‘It doesn’t feel like I’m blowing £100 on shoes’.

See what other participants also had to say 👉 https://t.co/e9lewjXBVg pic.twitter.com/ruomMA84EF
— Which? (@WhichUK) January 6, 2022

Rocio Concha, Which? Director of Policy and Advocacy, said: “BNPL schemes can offer speed and convenience at the checkout, but our research shows that many users do not realise they are taking on debt or consider the prospect of missing payments.”

“That is why there must be stronger safeguards to protect consumers and warn about the risks of using the schemes. Payment terms, late fees and the potential consequences of missed payments should be communicated at the point of transaction.”

Concha concludes: “There must also be no further delay to plans for BNPL regulation, which should include much greater marketing transparency, information about the risks of missed payments and credit checks before consumers are cleared to use BNPL providers.”

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