A quarter of young people making Buy Now Pay Later (BNPL) repayments haven’t been able to pay for food, rent, or household bills as a result of the commitment, research by Citizens Advice has found.
The research shows 45% of 18 to 34-year-olds in the UK have used Buy Now Pay Later in the last 12 months. Almost half of these committing without realising and one in three went on to regret the decision.
Buy Now Pay Later is often advertised at online checkouts 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% of UK adults have used these firms in the last 12 months, rising to 37% of disabled people and 45% of people with a mental health problem.
A recent review of BNPL products carried out by the former FCA Interim Chief Executive, Christopher Woolard CBE highlighted the need for regulation in the space. Currently, BNPL products are exempt from regulation. The review recommended BNPL products be brought within the regulatory perimeter as a matter of urgency. The use of BNPL products nearly quadrupled in 2020 and is now at £2.7 billion, with 5 million people using these products since the beginning of the coronavirus pandemic. The emergence and expansion of unregulated BNPL products give consumers a significant alternative to more expensive credit, but this also comes with significant potential for consumer harm.
The research conducted by Citizens Advice also found almost two in five (5.7 million) who’ve used Buy Now Pay Later in the last year didn’t think it was ‘proper borrowing’ and six million didn’t fully understand what they were signing up for.