National Financial Ombud warns against Buy Now Pay Later schemes

AS FESTIVE season promotions intensify across the country, the National Financial Ombud (NFO) has issued a strong warning to consumers to exercise caution when considering Buy Now Pay Later (BNPL) offers.

- DIEKETSENG MALEKE

AS SOUTH Africans face increasing Buy Now Pay Later (BNPL) offers during the festive season, the National Financial Ombud warns these unregulated credit options carry hidden risks that could push already-strained households into deeper financial trouble. Learn how to protect yourself from the pitfalls of these seemingly convenient payment plans. | FILE

It says while these schemes are marketed as simple, convenient, and interest-free payment options, they carry hidden risks. In an economy where many households are already weighed down by debt, BNPL can easily worsen financial vulnerability and strain.

According to the NFO, BNPL products are not regulated under the National Credit Act (NCA). This means consumers do not benefit from the usual safeguards such as affordability checks, transparent cost disclosures, or formal dispute resolution channels. Despite this regulatory gap, BNPL is spreading rapidly in South Africa, often leaving consumers exposed without fully understanding the risks.

Nerosha Maseti, lead ombud for banking and credit at the NFO, warns that the explosive growth of BNPL, combined with weak regulatory guardrails, is a recipe for trouble. Vulnerable consumers risk slipping deeper into debt as BNPL spreads unchecked.

"Buy Now Pay Later may appear harmless or even helpful, but in reality, it operates as a form of unregulated short-term credit.

"When payments are missed, fees escalate. Budgets collapse. What starts as a convenient purchase can turn into a serious financial setback, particularly because consumers do not benefit from the usual protections provided under the NCA," says Maseti.

Maseti cautions that BNPL often stacks on top of existing financial commitments, intensifying debt pressure.