Iceland faces backlash over buy now, pay later scheme

Iceland faces backlash over ‘deeply disingenuous’ buy now, pay later scheme as critics accuse the budget supermarket of ‘encouraging’ cash-strapped customers to spend beyond their means

  • Critics say new scheme encourages shoppers to spend beyond their means
  • Labour MP Stella Creasy branded the initiative ‘deeply disingenuous’
  • Frozen food chain has launched interest-free ‘microloans’ of up to £100
  • Scheme launched to help families through cost of living crisis, says Iceland 

MPs are leading a fierce backlash against Iceland’s ‘buy now, pay later’ scheme, warning it will encourage cash-strapped shoppers to spend beyond their means. 

The frozen food chain announced yesterday it was offering shoppers interest-free ‘microloans’ of up to £100 to help cover their weekly shop amid soaring food costs. 

Critics have blasted the new scheme, branding it ‘deeply disingenuous’ and say it encourages customers to spend beyond their means and rack up debts. 

Labour MP Stella Creasy, who has previously campaigned against payday loans, accused Iceland of ‘encouraging’ its customers into debt. 

In a tweet criticising the new scheme, she said: ‘deeply disingenuous – offering your customers a BNPL option to pay for food isn’t ‘helping’ during cost of living crisis.

‘It’s exploiting evidence makes consumers spend more to spread payments and lack of consumer protection to manage debt they rack up! #sharks’.

Iceland Foods Managing Director Richard Walker, pictured, said that ‘fresh thinking’ is needed by businesses is needed to combat the cost of living crisis and find workable solutions 

Labour MP Stella Creasy has criticised Iceland for offering a ‘buy now, pay later’ scheme for customers, saying that it is helping during the cost of living crisis

The MP for Walthamstow said the scheme encourages customers to spend more than they usually would and called for further regulation of the BNPL market

Following the backlash, Iceland’s managing director Richard Walker has defended the ‘affordable microloans’. 

During an interview with Sky News, he said: ‘Yeah, so it’s something we have been trialling for the last 18 months.

‘These are affordable microloans that are very time-limited and small amounts – anything from £25 up to £75.

‘You repay a set amount of £10 a week and there’s no interest; we will pay the interest on the borrower’s behalf.

‘We’ve partnered with a charity-owned not-for-profit called Fair For You, an ethical lending provider, and they are assessing people who are struggling to make ends meet – as you said, there’s plenty of those around at the moment.

‘And, if they’re successful in their application, they’ll get a pre-loaded Mastercard that they can spend in an Iceland shop.’

How does Iceland’s ‘buy now, pay later’ scheme work? 

Iceland’s new initiative, announced in partnership with charity lender Fair for You, allows customers to take out small loans on a pre-loaded card to cover their grocery shop- of up to £100. 

Shoppers will be able to initially apply for a Food Club Card on Fair for You’s website which is pre-loaded with an amount of between £25 and £75. 

For additional Iceland shops, further credit can be taken out. There is a total limit of £100 outstanding at any one time.

People will pay back £10 a week and are able to choose the day that they make repayments, able to overpay when it is convenient.

For the scheme, new customers are eligible, with the initiative subject to availability and a checker online for who can use the system.  

People on benefits can apply, as long as they have a stable, regular income and a bank account which they can make their repayments from.   

Potential customers on the scheme can apply online and will receive a decision on their application during business hours. 

Those who are successful will get a preloaded card within five to seven working days. 

People can then use the balance on their card to shop in store or online at Iceland.

People will pay back £10 a week and are able to choose the day that they make repayments, able to overpay when it is convenient (stock image)

Inflation on groceries has spiked to 11.6 per cent of the four weeks to August 7, compared to 9.9 per cent in the month before. 

According to research firm Kantar, his is equal to a £533 annual increase on a grocery bill for a UK household.

Butter, milk and poultry are three items which have majorly caused price surges in the UK.

The BNPL sector is estimated to be worth £8billion after ballooning in recent years, with Swedish giant Klarna continuing to dominate the market.

However, around a third of borrowers are thought to be in ‘unmanageable debt’, according to a recent study by Barclays and debt charity StepChange.

Ziad El Baba, general manager of finance website Credit Karma, warned: ‘As the cost of living continues to soar, consumers are increasingly relying on BNPL.

‘While this can be a great tool for spreading out costs over time, it can be an easy way to spend beyond your means, which can lead to a cycle of debt for those who need to use credit cards, overdrafts and loans to make repayments toward their BNPL debts.’

Iceland’s new initiative aims to offer customers in the UK an affordable, flexible credit solution to combat food poverty, with six available windows throughout the year.

The scheme is particularly for the school holidays so that parents can keep their cupboards stocked. 

Fair for You said they understand that circumstances can change, and if you are struggling with repayments they say they will work with you to rearrange a payment plan to help you get back on track wherever possible.

Fair for You and Iceland hope that their new scheme will allow customers to smooth out their incomes and not have to rely on using the loans throughout the year. 

The launch of their scheme comes after a successful regional trial with 5,000 participants. 

Statistics from the trial revealed that 95 per cent of those involved in the trial found it helpful, while 71 per cent were less likely to fall behind on rent, council tax and other bills as a result of the scheme. 

It also had a positive effect on people’s reliance on foodbanks, with 92 per cent of those involved saying that the scheme decreased or stopped their need to use them. 

And more than half of participants, or 57 per cent, said that they were less ‘stressed, anxious or depressed’ about their finances because of the scheme.

Meanwhile, 65 per cent said that their diet had improved, ITV reports. 

This initiative has been supported by HM Treasury, NESTA and the Esmee Fairbairn Foundation. 

In the scheme so far, £1 million has been lent to Iceland customers, according to Tyla. 


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Iceland’s new initiative, announced in partnership with charity lender Fair for You, allows customers to take out small loans on a pre-loaded card to cover their grocery shop- of up to £100 (stock image)

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