One in 10 Buy Now Pay Later (BNPL) consumers have been chased by debt collectors, with the number rising to one in eight amongst young people, according to new research from Citizens Advice.
While “millions” of shoppers in the UK use BNPL to split or delay payments, Citizens Advice has warned that the schemes can be a “slippery slope into debt”.
The charity’s latest research shows BNPL shoppers were charged £39m in late fees in the past year.
Of those who were referred to a debt collector for missed payments, 96% experienced a negative consequence, reporting one of the following: sleepless nights; ignoring texts, emails and letters in case they were about debts; avoiding answering the door; borrowing money to repay the debt; or their mental health getting worse.
Nonetheless, Citizens Advice said it found that no BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments. Instead, it found this was only flagged in the T&Cs on a separate page, “if at all”.
The group conducted mystery shopping at 100 leading retailers and found 38 offered BNPL, with 22 offering more than two BNPL options, meaning there were a total of 74 BNPL checkouts.
It also found that out of those offering BNPL, only 11% warned shoppers they were taking out a credit agreement, whilst the remaining 89% put this information in the small print or T&Cs.
In light of this, Citizens Advice is calling on the Treasury to urgently regulate BNPL as it fears shoppers have been left unprotected and ill-informed during the rapid expansion of the sector.
Millie Harris, a debt adviser at Citizens Advice East Devon, said: “My concern is that people aren’t processing the fact that Buy Now Pay Later is credit. They don’t realise there are going to be consequences if they don’t pay – it gives them a false sense of security.
“I’ve seen people using it for their kids’ clothes and shoes that they would otherwise never be able to afford. They are taking out what is effectively a loan, but they don’t see it as one. For example, I helped someone who has tens of thousands of pounds of debt, but they don’t see Buy Now Pay Later as part of that total.”
Dame Clare Moriarty, CEO of Citizens Advice, said: “The sheer number of shoppers facing debt collection is startling. We know from our frontline advisers just how much stress this can cause.
“A seamless Buy Now Pay Later checkout process should not mean shoppers have to dig around in the small print to find out they’re taking out a credit agreement, and could be referred to debt collectors if they can’t pay. The warnings should be unmissable. The Buy Now Pay Later industry has exploded and we need consumer protection to keep up with the changes in the way we live. We hope the Treasury can keep pace.”