Which? has uncovered scores of online retailers - offering 'buy now, pay later' (BNPL) schemes as well as other payment methods at the checkout - with returns policies on their websites in breach of UK consumer law.
Klarna, Laybuy and Clearpay, three of the biggest BNPL firms, all use their apps and social media accounts to help you find new retailers you might not have heard of before.
But our research found more than 170 online retailers, listed on at least one of the BNPL firms' apps or websites, whose returns and faulty goods policies are incorrect or unclear.
The retailers also offer other payment options such as PayPal, Apple Pay, Google Pay and Amazon Pay, as well as letting customers pay directly with debit or credit cards.
However, customers shopping with these retailers could end up out-of-pocket depending on the payment method they choose to use if the stores refuse to accept returns for unwanted or faulty goods.
Which? is writing to the retailers, urging them to change their policies in line with UK consumer law.
Here, we look at the retailers' questionable policies and explain how to get a refund when paying with BNPL schemes and other payment options.
The new breed of BNPL schemes are fast and easy to sign up to when shopping online, allowing you to borrow within a few clicks and without any hard credit-checks.
But, if you're thinking of using one to pay for something online, it's important to check the retailer's T&Cs before placing an order.
A regular Laybuy customer got in touch with Which? after finding an online store with a strange returns policy through Laybuy's app.
Crazy Shred - which offers Laybuy, PayPal, BitPay and the option to arrange a bank deposit at the checkout - sells gym equipment, clothes and tech products.
The firm's returns policy on its website stated that a £25 administration fee would be charged for orders cancelled after 48 hours of being placed.
This policy is contrary to the Consumer Contracts Regulations which gives you rights to cancel most online orders for goods from the moment they are placed, up until 14 days of receiving the goods.
'It surprises me that Laybuy doesn't carry out all the relevant checks,' the customer told us. 'I would never have found this company if they weren't on the Laybuy seller page.'
After Which? got in touch with Crazy Shred, it removed the administration fee from its returns policy.
Another BNPL customer, Lesley, was left disputing a payment with Klarna after she shopped with a fraudulent site that's since been taken down.
'When I saw the site offered Klarna payments, I didn't even think to go on Trustpilot to check them out,' she told us. 'You assume the company is credible if they're running these kinds of financing options.'
Lesley was frustrated with herself for not researching the retailer beforehand.
'I felt stupid for using the retailer just because I saw Klarna on there - it gave me the confidence that they were credible,' she said. 'Using Klarna is so easy to use that I feel I've been lured into a false sense of security.'
Lesley managed to get a full refund from Klarna and continues to use their products but has since changed her shopping habits.
'I wouldn't use Klarna for any retailer other than well-known high street stores now,' she explained.
After hearing these stories, Which? looked into other retailers listed on BNPL schemes websites and apps.
While BNPL firms aren't responsible for retailers' T&Cs, customers could be finding stores with incorrect policies through their platforms.
Of the retailers we found issues with:
The Consumer Contracts Regulations gives you rights to return items when shopping online.
There are some circumstances where the Consumer Contracts Regulations won't give you a right to cancel. These include perishable items, tailor-made or personalised items, and goods with a seal for hygiene reasons.
For most items, though, you have a minimum of 14 days after receiving an order to notify a retailer that you'd like to make a return, and a further 14 days after this to actually send the items back.
These rules apply for items bought in the sale or on discount too, and you shouldn't be charged to make a return.
Many of the stores we looked at, however, refuse refunds on full-priced, non-faulty or sale items, offering store credit or exchanges instead.
Some of the retailers only give you 14 days or less to send an unwanted item back, while others charge a 'restocking' or 'administration' fee, some as high as 20% of the price of your unwanted items, for making a return.
We also found some retailers explicitly stating they won't refund original shipping costs.
You should receive original standard shipping costs back as part of your refund in line with the Consumer Contracts Regulations.
If you paid extra for faster delivery or nominated-day delivery, you're only entitled to receive the seller's standard shipping cost back.
Our research also found 36 retailers with incorrect or misleading faulty goods policies that could leave you stuck with items that aren't fit-for-purpose.
The main issue we found was retailers not giving you long enough to detect or report a fault with a product, with some asking for faults to be reported within a few days of the order being received.
This is in breach of the Consumer Rights Act, which gives you 30 days to exercise your short-term right to reject the product.
After 30 days, you could still be entitled to a repair or replacement if the item is faulty and in some cases, a further right to reject. The onus is on you to prove the fault was present when the item was purchased if you notice the defect after six months.
You shouldn't have to pay return shipping costs for faulty items either.
Another company, selling drones, only offers a 70% refund if a faulty product is reported after 15 days of delivery, while one fashion retailer says faulty goods are only exchangeable and return shipping is non-refundable.
Customers could find themselves stuck with faulty goods - and having to temporarily continue paying them off to the BNPL scheme - if shopping with these retailers.
It's not just BNPL firms offering their payment products to these retailers with incorrect returns policies.
Many of the stores also offer PayPal, Apple Pay, Google Pay and Amazon Pay. Customers can also use their credit or debit cards on most sites.
So customers that arrive at these sites via BNPL apps or websites can choose to pay however they wish - but it's important to realise the payment protections for each payment method varies.
Aside from Klarna's 'Pay in 6 - 36 months' finance option, BNPL schemes aren't regulated under the Consumer Credit Act. This means BNPL firms don't need to display wording about the risks involved with borrowing, and you won't benefit from Section 75 protection if you buy something over £100 and something goes wrong.
Here's an overview of the protection policies in place for different payment providers - but it's important to always check a retailer's T&Cs to avoid having to make a claim in the first place.
|BNPL schemes (Klarna, Laybuy, Clearpay)||You don't get Section 75 protection. Each scheme has its own buyer protection policy, but they aren't enshrined in law.|
|Credit card payments||Purchases over £100 and under £30,000 usually covered by Section 75.|
|Debit card payments||You don't get Section 75 protection. You can attempt a chargeback claim with your bank - though this isn't enshrined in law.|
|PayPal||You'll get PayPal Buyer Protection, which isn't enshrined in law. You can attempt to make a Section 75 claim if you've paid over £100 through PayPal using your credit card, but there's some uncertainty around whether Section 75 claims work when paying through PayPal.|
|Google Pay and Apple Pay||Covered by Section 75 if you pay over £100 using a credit card. You can try a chargeback claim if you pay using a debit card.|
|Amazon Pay||You get Pay A-to-Z Guarantee, though this isn't enshrined in law. You might not be able to use Section 75 even if you pay over £100.|
Amazon says it wants customers to buy with confidence anytime they use Amazon Pay. The condition of the item you buy and its timely delivery are guaranteed under the Amazon Pay A-to-z Guarantee.
Google says it strives to make Google Pay as safe as possible for users, and that it will take action when retailers diverge from their terms of services.
Klarna told us it carefully underwrites any potential partner before any onboarding is confirmed and takes immediate action where merchants aren't operating to required standards.
'We make sure that terms and conditions, including our ethical guidelines policy, and applicable laws and regulations are followed,' it told us.
Klarna says its Buyers Protection Policy is designed to let consumers feel at ease when they shop with one of their merchants' stores.
If something goes wrong with an order, it says it has a clear process to help shoppers resolve issues and ensure no customer is unjustifiably liable to pay for a purchase. Concerned Klarna customers can raise a dispute in the app or contact Klarna's customer services.
For incidents of fraud, Klarna advises customers to contact them directly, where they'll get help from a dedicated agent trained to handle fraud cases.
Klarna also told us it supports regulation of the sector. It says it's vital that regulation is updated for the digital age, to ensure consumers are protected regardless of the provider they choose.
Laybuy says it's disappointed some customers have had a negative experience with a small number of retailers that offer Laybuy as a payment option.
It says refunds via Laybuy are subject to each retailer's refund policy, and advises customers to ensure they're happy with a retailer's terms and conditions before purchasing from them. Customers should contact the merchant first if they wish to dispute an issue.
Once a refund is approved by the merchant, Laybuy will process the refund immediately and send an email confirmation. Until a refund is approved, customers are liable for any outstanding payments.
There are a range of options to any Laybuy customer struggling with repayments or refunds, and Laybuy says it does its utmost to help customers where it can.
Clearpay says it carries out regular reviews of merchant websites, transaction data and inquiries to ensure retailers comply with consumer law.
It reserves the right to end merchant agreements if they are in breach or have not handled a customer complaint in a legal way, and can withhold payments or refund the customer if it believes a merchant has breached consumer law.
Clearpay takes the safety of its customers extremely seriously and encourages customers to contact its customer service immediately if they're concerned.
Don't get caught out by retailers with incorrect returns policies - read our advice on shopping safely online and securing your money back if something goes wrong.
It's important you don't assume a retailer is legitimate just because it offers a payment provider you use regularly.
If you haven't heard of the retailer you're shopping with, it's worth doing a bit of research beforehand.
You can go on their Trustpilot and social media pages to look for any red flags in the reviews and comments.
But make sure you watch out for fake reviews.
We found two retailers that offer BNPL schemes, including Neon Beach, who have had fake reviews removed by Trustpilot.
Other retailers we looked at had reviews posted in what appears to be batches on certain days, which raises suspicions.
Make sure you look at the store's policies before buying anything.
Remember that you have a minimum of 14 days from the day you receive the product to notify the retailer you'd like to cancel, and a further 14 days from when you cancel to send something back for a full refund.
This includes sale items too.
If you find yourself struggling to return an unwanted or faulty item, and you paid with a BNPL scheme, there's a couple of things you can do.
If you used a debit or credit card to pay, you can try to make a claim with your payment provider if something goes wrong.
Section 75 protection, which you get when you pay by credit card, means your bank is jointly liable with the retailer if something goes wrong.
Chargeback is a process where your bank claws back money from the retailer. It isn't enshrined in law but well worth trying if you're struggling to resolve your issue.
BNPL is growing rapidly and it's important that the Financial Conduct Authority (FCA) can step in to prevent harm caused by these types of payment schemes.
Which? is calling for the new wave of BNPL schemes to be regulated by the FCA, which currently does not have the powers to act if BNPL schemes are treating customers unfairly.
By giving the FCA the powers to regulate the BNPL market, it can more effectively monitor and intervene if consumers are harmed by BNPL business practices.
The FCA is already looking into unsecured credit, which BNPL is one example of. Which? has given evidence to this review and will continue to share insight.