New research from Citizens Advice shows that one in 10 Buy Now Pay Later shoppers have been chased by debt collectors, rising to one in eight young people. That’s why we’re urging people to think twice before spreading their payments and to talk to the Credit Union first if you need help to pay for your purchases.
It’s so easy to click on the button to spread your payments when you’re shopping online, and millions of shoppers in the UK now use Buy Now Pay Later to split or delay payments. But Citizens Advice warns that, for many people, it can be a slippery slope into debt. The charity’s latest research shows that Buy Now Pay Later (BNPL) shoppers were charged £39 million in late fees in the past year.
Of those who were referred to a debt collector for missed payments, 96% experienced a negative consequence. They reported at least 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.
Yet the charity found that not one of the BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments. Instead, this was only flagged in the T&Cs on a separate page, if at all. Citizens Advice 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.
The research also found that out of those offering BNPL, only 11% warned shoppers they were taking out a credit agreement, the remaining 89% put this information in the small print or T&Cs.
Citizens Advice is calling on the Government to urgently regulate BNPL as it fears shoppers have been left unprotected and ill-informed during the rapid expansion of the sector.
Dame Clare Moriarty, Chief Executive 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.”
Credit Union Chief Executive Martin Groombridge added: “Buy Now Pay Later is causing problems for more and more people who are often unaware that they are entering into a credit agreement. When people miss payments or struggle to repay their loans, they can end up with late payment fees, spiralling debts, and an unwelcome visit from a debt collector.
“That’s why we would urge people to talk to us first if they need some help to pay for their purchases. We offer a range of affordable loans and safe savings, and we will never encourage people to borrow more than they can afford.”
Anyone who has been contacted by debt collectors is urged to get free, independent debt advice. Contact Citizens Advice for more information and take a look their Debt and Money Advice page for guidance.