November is Financial Literacy Month, and this year’s theme — “Talk Money” — encourages Canadians to normalize conversations about budgeting, debt, and financial stress. In this seven-minute video, Professor Gail Henderson, a leading voice in consumer financial protection, joins JD student Nicolina Fasciano to unpack the growing popularity of “Buy Now, Pay Later” (BNPL) services. From the appeal of interest-free installments to the hidden risks of overspending and missed payments, this candid discussion offers valuable insights for students, young consumers, and anyone navigating today’s digital marketplace.
Transcript
0:00
Nicolina Fasciano: I’m joined today with Gail Henderson, the Allgood Professor of Business Law and the Director of the Business Law Program here at Queens.
0:07
November is Financial Literacy Month and we decided it would be a good time to discuss buy now, pay later, which is a service that impacts many young people, including students.
0:18
Thank you Professor Henderson for joining us today.
0:20
Gail Henderson: Thank you, Nicolina.
0:22
Nicolina Fasciano: So as an avid online shopper, something that I've noticed recently is underneath an item’s purchase price, it will have that price divided in four and an offer to pay in four installments.
0:37
Could you tell us a bit more about how the buy now, pay later process works?
0:42
Gail Henderson: Yeah, so it's sort of in the name, right?
0:47
It allows you to buy a product now by paying just 1/4 of the purchase price upfront.
0:54
As you mentioned, often it’s seen most prominently when buying things online that you can pay the entire purchase price or in four installments for equal installments and buy now, pay later providers tend to emphasize the zero interest, no fee message, although there can be interest if you need to spread that out over a longer period of time than the initial agreement you entered into.
1:23
The default is usually equal payments every two weeks after the purchase until it's paid off.
1:31
But the point I want to emphasize is that buy now, pay later is not a type of payment.
1:36
It's a type of credit.
1:37
And so when you use buy now pay later, you are taking out a loan or you are taking on debt that will have to be repaid.
1:45
Nicolina Fasciano: OK. And from what I understand, you don't need a high credit score to take out one of these micro loans.
1:54
It may be, I guess, good for larger purchases such as a plane ticket.
1:58
But could you tell us a bit about the risks involved?
2:01
Gail Henderson: Yeah, And I agree, I think it can be a good option for students for something you're going to buy anyway, that the zero interest is appealing and it does allow you to spread a big payment over a longer period of time.
2:14
The risk with buy now, pay later, as we've discussed in the Consumer Protection Law course here at Queen’s Law, is the risk of overspending.
2:22
So the reason the buy now pay later provider can offer you a loan at zero interest is because the retailer is paying them a relatively high fee to offer that option to their customers.
2:35
And the reason the retailer is willing to do that is because buy now, pay later makes it more likely that you will complete your online purchases.
2:43
So in other words, it's less likely you'll abandon items in your shopping cart and it's more likely that you will add an additional item or additional items to that that you were not intending to purchase when you went online initially.
2:56
And so the risk is that you take on too many buy now, pay later loans and paying off that debt becomes unsustainable or you're unable to do so.
3:06
And if the debt is sent to a collection agency, that is going to negatively impact your credit score.
3:12
Nicolina Fasciano: OK, that's great to know.
3:15
And I think something important to keep in mind is that Gen.
3:20
Z is the most affected demographic and utilizes these services the most.
3:27
I recall even seeing links to things like Klarna or Afterpay on social media.
3:32
So could you tell us a bit about that?
3:35
Gail Henderson: Yeah, and I'm glad you brought that up.
3:37
I think that link to social media and online shopping is what makes buy now, pay later different from traditional forms of installment payment plans.
3:46
So I think there's a big difference between me walking into a furniture store because I need to buy a couch and entering into installment plan with that retailer.
3:57
And those also come with risks.
3:59
But that's very different from sitting at home and being online, being on social media and seeing an ad for something or seeing an influencer talk about something that I had no intention of purchasing.
4:12
And maybe I'm more willing to do so because I see that buy now, pay later option.
4:17
And so that's where there is an increased risk of overspending and also impulse buying with buy now, pay later.
4:24
I think that the ease of it definitely plays a role in the potential for overconsumption.
4:31
Nicolina Fasciano: What are some other issues that you've noticed?
4:34
Gail Henderson: I think the ease of it is, also, and I'm glad you mentioned that it's very frictionless for consumers, which is the appeal.
4:42
But then if you are using it for multiple purchases, if you've got many different buy now, pay later loans outstanding, then you're going to have a different payment due date for each of those installments.
4:54
And that can be hard to keep track of and increase the risk of a late payment or a missed payment.
4:59
And that's where you can incur additional fees, not only from the buy now, pay later provider, but if you don't have enough money in your bank account when that payment is due to come out, you can get hit with an NSF or insufficient funds fee from your bank.
5:14
And currently those can be as high as just under $50.00.
5:19
So that's an expense you weren't expecting.
5:22
And then the other issue with buy now, pay later is that when you use that, just returning the product to the retailer — say you decide it's not actually what you wanted and you return it — that doesn't terminate the loan automatically.
5:36
The retailer has to communicate that to the buy now, pay later provider.
5:40
So you could end up having to make the next installment even though you've already returned the item.
5:45
Nicolina Fasciano: OK, that's great to know.
5:46
I think that especially regarding returns, I don't believe many consumers would have been aware of that.
5:53
So that's great information.
5:54
Are there any specific resources that you recommend to consumers or students who are interested in learning more about the potential risks involved?
6:02
Gail Henderson: The Financial Consumer Agency of Canada, which is a federal government regulator, they provide a lot of good, unbiased information about a large number of financial products.
6:15
And they have a web page dedicated specifically to buy now, pay later.
6:19
And so that's what I would recommend.
6:20
Nicolina Fasciano: Wonderful.
6:21
We'll have that link available at the end of the segment.
6:24
I want to say thank you to Professor Henderson for joining us today and providing invaluable insight on this financial topic.
6:31
Gail Henderson: Thanks, Nicolina.
6:32
It was my pleasure.
Learn more about buy now, pay later plans on the Financial Consumer Agency of Canada website.