User Agreements For BNPL Services May Be Flawed, According To Study

Buy Now, Pay Later services are under fire, as a newly released study finds that terms & conditions contracts are becoming longer and more legally elusive among BNPL companies. The study, conducted by NerdWallet, rated 12 companies on a clarity score, which indicates how easy it is to understand what a potential customer is signing up for. It also examined how long it would take the average person to read the entire agreement.

The study found that, across the board, it took an average of 37 minutes to read through the terms and conditions of a BNPL service. One of the most popular BNPL companies to date, Klarna, was found to have the worst results, with a low clarity score of 48%, and an hour-long commitment needed to read through the entire agreement.

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The only company to receive a reasonable score in the study is Zip, an Australian business, with a 92% clarity rating and a 20-minute average to read its terms and conditions. Other companies examined did not even break the 75% barrier in their ratings.

This information is significant because it provides insight into a larger trend in BNPL practices. Some of these companies may have a somewhat predatory approach to business practice, with the prey being young adults between the ages of 18-34. Many of these younger consumers have little to no experience with debt and may often not have the money to pay for the purchases they agree to. Additionally, these drawn-out terms and conditions often lead to hasty agreements that can often cost customers hidden fees, if not legal action against them in the long run.

Many EU countries are already looking into legislation to put BNPL services in check and prevent further damage. The key to staying afloat in this industry could be the very thing a lot of these companies lack: transparency.

Examining the top ranker of the study, Zip, for instance, would show a steadily growing company that has not only seen steady profits, but actually just began funding for a $307 million expansion which would bring this service into other countries. It has the highest rated customer service amongst its peers and offers a transparency that is unmatched in its field.

If more companies implemented this approach to business, the industry would likely see less future legislative restrictions and garner a customer base that trusts in the services that it is receiving.