The majority of Brits are uncertain about the most basic terms of their credit agreements, according to new research.

The new study, commissioned by Buy Now, Pay Later (BNPL) firm Klarna, found that the Consumer Credit Act rules leave most Brits “lost in legalese”, with only two in five consumers able to answer the most basic questions about a credit card they have just applied for.

Fairer Finance, who undertook the study on Klarna’s behalf, tested how effective the Consumer Credit rules were by asking a nationally representative group of 30 people who used or were considering getting a credit card to complete a mock application. From there, they tested the group’s comprehension of key terms found in the rules.

The results showed that none of the group were able to answer the most difficult question - what is the fee for withdrawing cash overseas? - while even the easiest question - does this credit card charge an annual fee? – was only answered correctly by two thirds of respondents.

Alex Marsh, head of Klarna UK said that getting disclosure rules right was “vital to having well-informed consumers”.

“But the current rules don’t do that,” he said. “They leave consumers confused and, ironically, this pushes them towards expensive and higher-risk forms of credit.”

Klarna and Fairer Finance said they plan to discuss their findings with MPs and debt charities in the coming weeks.

“Credit cards are complicated and we’ve long suspected that banks are not giving customers the information they need to understand them,” added James Daley, managing director at Fairer Finance. “Now we have the evidence to prove it.”

The UK government has recently launched its long-awaited consultation on BNPL which may ultimately result in greater regulation of the credit format.

Share Story: