Citizens Advice warns Buy Now Pay Later schemes can be ‘slippery slope into debt’

citizens adviceCITIZENS Advice has found quarter of young people making Buy Now Pay Later (BNPL) repayments haven’t been able to pay for food, rent or bills as a result. 

New research from Citizens Advice shows 45 per cent of 18 to 34 year olds in the UK have used Buy Now Pay Later in the last 12 months. Alarmingly, half of these did it without realising they were signing up for credit and one in three went on to regret it.

The UK’s top BNPL providers include Klarna, Clear Pay and Laybuy.

Buy Now Pay Later is often advertised at online checkouts of popular retailers such as Boohoo as an easy way of splitting or delaying payments on items such as clothing or electronics, with incentives like it being ‘interest-free’.

But Citizens Advice fears for many people it can be a slippery slope into debt. Overall, 27 per cent of UK adults have used these firms in the last 12 months.

The charity is warning that four in ten of those who’ve used Buy Now Pay Later are struggling to repay. It found a quarter of consumers regretted paying using these platforms, with the most common reasons being spending more than they can afford, and paying more than they expected.

And repayments are not the only problem, with three in ten BNPL users saying they’ve been charged a fee they didn’t expect.

Sharonjit, 32, bought £600 worth of clothes and used a Buy Now Pay Later firm to pay in instalments. She didn’t receive the goods and so cancelled her payment to the BNPL firm while she waited for the issue to be resolved by the retailer.

She said: “The whole thing has been so stressful. I’m constantly on edge. I’ve just been barraged with calls, emails and letters from a debt collector.

“The BNPL firm said they were referring me on to someone and I had no idea it was a debt collector. I had no idea Buy Now Pay Later could impact my credit score.

“I’ve never had issues shopping this way before. But this time it’s like as soon as something went wrong they’ve washed their hands of me.”

Citizens Advice believes Buy Now Pay Later firms must overhaul their checkout processes to ensure shoppers aren’t encouraged to spend more than they can afford.

Customers must also be treated fairly if they are struggling to repay, and be able to escalate problems to the Financial Ombudsman Service.

Currently the Buy Now Pay Later sector is not regulated and typically does not run affordability checks but the Financial Conduct Authority announced in February that BNPL services face stricter rules in future.

Citizens Advice will share its research with the Financial Conduct Authority, as it decides how BNPL firms will be regulated.

Alistair Cromwell, acting chief executive of Citizens Advice, said: “Buy Now Pay Later borrowing can be like quicksand – easy to unwittingly slip into and much more difficult to get out of.

“It shouldn’t be possible for people to sign up for credit without realising, and the fact this is happening so often signals that a drastic overhaul is needed.

“This industry more than trebled in 2020, and while these products work for many shoppers, the regulator has rightly recognised the potential for harm. It must ensure robust consumer protection keeps pace with changes in how we shop.”

During COVID restrictions, Bridport & District Citizens Advice offers comprehensive advice on debt, benefits and other issues.

Telephone Freephone 0800 144 8848 or send an email using the contact form on the website or leave a message on 01308 456594.

Woodmead Halls

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