Urgent warning over Zilch’s new £100 pre-payday cash feature that could leave customers ‘trapped’ in borrowing cycle

THE Buy Now Pay Later provider Zilch is lending customers money to help them get to payday – but critics worry about people being “trapped” into depending on it. The lender is rolling out a new feature called Advance where eligible customers can borrow as much as £100 up to seven days before they get paid, with no interest. The money is sent directly to their bank account and is repaid on payday, together with a £3 transfer fee. The new cash feature is a change from Zilch’s usual way of lending, where users have a virtual Zilch card to pay for items online and in stores and spread the cost in four instalments. Sign up for The Sun newsletter Thank you! Advance has been widely anticipated among Zilch users, with many hoping to be offered it. The feature is only being provided to customers who can repay it after the provider has checked the income into their current account. But consumer champions worry people will start relying on it, leaving them constantly in need of borrowed cash before each payday. To qualify for Advance you need Zilch Extra, which connects your current account to Zilch through open banking and costs £2.99 a month. Debt expert Sara Williams, who posts as @debtcamel on Instagram said: “If you use this once and won’t be left short next month if £100 is taken on payday, then it’s a convenience. “But for many people needing to use this, they will be short the next month so they may be trapped having to reborrow the same £100 every month and paying £3 a month for the privilege.” Most read in News Money Consumer champion Martyn James added: “In theory, there’s nothing wrong with an interest free way to access your money for a small fee. “But the problem here is it doesn’t help people out of financial difficulties, it just moves it down the line a week. “The actual solution is to make bigger businesses provide low or no interest features for customers in financial difficulties to help them get out of debt completely – without financial penalties.” Zilch – which is regulated by the FCA – explained that all customers are given a credit limit based on affordability checks, and that those who use Advance cannot go above their pre-agreed credit limit. A statement said: “What it does is allow a customer to access credit they already have available, knowing they will repay it within seven days when they are paid.” The company added that it will check customers’ incomes through open banking to ensure they are able to repay the Advance. “Customers must be up to date on all payments to access Advance in the first place, so those in significant difficulty would not be eligible,” they said. “If a repayment is missed, we treat it in the same way as any other payment on the account and reach out to help the customer get back on track. “We do not charge late fees or missed payment charges. We only offer Advance to customers we believe can afford to repay it within the timeframe, which is why the open banking income check is built into the eligibility process.” Advance is a one-off product, available once per calendar month, and is not a recurring or rolling facility. While not commenting specifically on Zilch, Adam Butler, public policy manager at the debt charity StepChange, said: “If well-designed, salary advance schemes and similar types of lending can provide a safer alternative to more expensive and potentially more harmful forms of borrowing like high-cost credit. “However, salary advances also carry risks of drawing people struggling with living costs into repeat use and wider debt problems. “Firms should ensure lending does not deepen financial difficulty or draw customers into a dependence on credit. “Our latest data shows that financial pressure continues to affect many working households. Nearly two-thirds (63%) of StepChange clients are now in full or part-time work, up from 59 per cent a year ago, while the cost of living remains the second highest driver of problem debt. “Anyone struggling with their finances, particularly those using credit to pay for essentials, should seek free and impartial debt advice as early as possible.” Comment now