Many buy now, pay later customers ‘borrowed money to make repayments’

According to Citizens Advice, more than two in five recent purchases (Buy Now, Pay Later, BNPL) borrowed money to make their repayments.

People were asked how they had paid back BNPL purchases over the past 12 months. About 42% had used some form of borrowing, such as B. a credit card, overdraft facility, loans from friends or family, a personal loan, a payday loan, or a guarantee loan. In the 18-34 age group, just over half (51%) had used some form of borrowing.

BNPL can be a way to inexpensively spread the cost of purchases without having to pay interest. However, the convenience of such services has raised concerns that people may feel overwhelmed as some have to rely on other fee-based borrowing methods to repay the money.

The UK government plans to amend the law to bring some forms of unregulated BNPL products under the Financial Conduct Authority (FCA) regulation. Swedish fintech firm Klarna recently announced that it will report use of BNPL products to UK credit bureaus from June to protect customers and give the industry greater visibility of BNPL use, thereby helping to improve affordability scores.

Opinium surveyed more than 2,200 people across the UK in March who had used BNPL in the previous 12 months. Millie Harris, Debt Advisor at Citizens Advice East Devon said: “Most of the people I speak to who use Buy Now Pay Later are living on bank overdrafts and credit cards and so use those for repayments. It only relies on one debt to pay another debt.”

Dame Clare Moriarty, chief executive of Citizens Advice, said: “Shoppers pile on credit and find themselves mired in increasingly desperate situations from which they find it impossible to escape. The debt spiral of buy now, pay later to credit cards, loans, and even payday lenders shows that this is not a risk-free alternative. Buy now, pay later is part of the banking industry and as such urgently needs to be regulated.”

A spokesman for BNPL firm Clearpay said: “Globally, 90% of Clearpay transactions are made with a debit card and 95% of installments are paid on time, showing that our customers are using their own money to pay for purchases and that they understand how our repayments are set up.

“Clearpay has always supported the expedient BNPL regulation that protects the consumer. We look forward to HM Treasury’s decision on this matter and will continue to work closely with regulators and the industry.”

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