National Financial Ombud warns against Buy Now Pay Later schemes this festive season

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.

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.

“BNPL doesn’t make items cheaper; it simply postpones payment. In reality, it creates a fresh debt obligation at a time when many households are already battling loan repayments, store accounts, and monthly bills. Without affordability checks, the danger of slipping into over-indebtedness rises sharply.”

She says that most BNPL agreements taken out in December require repayment in the first months of the new year.

“January and February are already challenging months for many families due to school-related expenses, annual increases in debit orders and the effect of festive season spending on disposable income.

“By adding BNPL instalments onto existing credit commitments can quickly disrupt a consumer’s entire financial ecosystem. This may lead to arrears, penalty fees, negative credit listings and, in some cases, formal debt collection action early in 2026,” she says.

The NFO says South Africa continues to grapple with elevated levels of over-indebtedness, and BNPL adds another layer of risk. These arrangements often do not appear on conventional credit profiles, meaning consumers can take out multiple BNPL deals across different retailers without realising how quickly instalments accumulate.

Other concerns include:

• Low initial instalments that disguise the true cost of repayment
• The absence of affordability checks
• The growing trend of consumers using BNPL to cover everyday essentials rather than discretionary purchases

“Many consumers assume BNPL is not real debt because it is easy to access. In practice, it can significantly undermine their ability to keep up with essential credit obligations such as mortgage payments, vehicle finance, and personal loans. We are concerned about the potential for BNPL to become a systemic contributor to rising over-indebtedness,” Maseti says.

Because BNPL is not protected under the NCA, the responsibility to assess affordability rests entirely with consumers. The NFO urges South Africans to carefully consider whether instalments can be repaid in full and on time, and whether new obligations will compromise existing commitments, she says.

Maseti advises against using BNPL for everyday necessities such as groceries, school supplies, and household bills, and warns against taking multiple BNPL agreements from different retailers simultaneously.

Since BNPL is marketed as convenient and sometimes interest-free, the absence of legal protection raises the risk of harm, says Maseti.

“We urge South Africans to think ahead. If an item cannot comfortably fit into your current budget, using Buy Now Pay Later does not make it more affordable. It simply shifts the repayment into a new year that may already be financially demanding.

“Consumers who feel overwhelmed by debt, or who are uncertain about their financial obligations, are encouraged to contact their credit providers as soon as possible failing which they may contact the NFO for guidance. The earlier consumers seek help, the more options they have to prevent long-term financial harm,” says Maseti.

The NFO offers the following steps to help South Africans safeguard their financial well-being and avoid over-indebtedness in 2026:

• Be honest about affordability: Assess whether you can repay the full amount in the coming months without compromising essential expenses. If you are already struggling to meet current commitments, avoid BNPL entirely.
• Read and understand the terms: Before accepting a BNPL offer, make sure you know what happens if you miss a payment, incur a late fee or fall behind. If the terms are unclear, treat that as a warning sign.
• Avoid taking multiple BNPL deals: Different retailers may offer separate BNPL options. Stacking several of these agreements can quickly become unmanageable.
• Do not use BNPL for essential items: BNPL is unsuitable for groceries, school stationery, transport, rent or medical needs. These expenses signal that your budget is already under strain.
• Track your payment dates carefully: Record all instalment dates in a diary, budgeting app, or digital calendar to avoid missed payments during the financially pressured months of January and February.

PERSONAL FINANCE