A group of charities has sounded warning bells over the growing use of buy-now-pay-later to buy goods.

Citizens Advice, a network of legal, money and consumer groups, said many users were getting into debt and struggling to pay for food and bills.

Buy-now-pay-later (BNPL) is increasingly popular among young people buying online, and at some High Street outlets.

Citizens Advice said many consumers regretted using it and is calling for tougher regulation.

It found that an alarming 45% of 18-to-34 year olds have used the payment option in the last year.

The repayment option is advertised at online checkouts as an easy way of splitting or delaying payments on items such as clothing or electronics, with incentives such as it being "interest-free".

In my experience, “Interest free” is a "slippery slope into debt".

More worrying is that CA discovered that almost two-in-five (5.7 million) who have used BNPL in the last year didn't think it was "proper borrowing" and six million didn't fully understand what they were signing up for.

It found a quarter of consumers regretted paying using these platforms, with consumers frequently saying they cannot afford repayments or are spending more than they expected.

Citizens Advice said firms must overhaul their checkout processes and improve affordability checks.

Both the Financial Ombudsman Service and Financial Conduct Authority had a greater role to play in the protection of consumers and regulation of the industry, it said.

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," Mr Cromwell said.

Several big - and smaller - names now operate in the fast-growing BNPL market, including Klarna, Clearpay, and Laybuy. PayPal launched a BNPL service last year.

The charity warned that four-in-10 of those who've used BNPL in the last 12 months are struggling to repay. Source: BBC and Citizens Advice.

If you are struggling with debt repayments in the UK, you can talk to the charity Citizens Advice.

Other Money News

City of London Plans To Convert Thousands Of Office Into Residential Units As Workers Staty At Home

Over 50’s Hardest Hit By Unemployment

The Office for National Statistics (ONS) has found older workers are amongst the hardest hit by unemployment over the last year.

The decline in the employment rate for the over-50s has double the rate for those aged between 25 and 49.

The Resolution Foundation added that after losing work, older workers take the longest to return.

The effects of last year’s recession have not fully hit most people. The job furlough scheme, rent and mortgage payment holidays, tenant eviction ban, Stamp Duty Holiday and other government financial stimulus packages have cushioned people from the full blow of the economic downturn. 

Similar packages are running in the US and many are coming to an end or about to expire.

Whilst the government needs people to go out and spend to boost the economy, this is not the time to spend £600 of money you don’t have to buy clothes you cannot afford on credit! 

There is good debt and bad debt. 

An example of good debt is borrowing to buy assets, such as a business or property which put money in your pocket.

An example of bad debt is the lady mentioned above or someone buying an expensive car they cannot really afford on credit. 

Another example of bad or even crazy debt is borrowing to buy more risky investments such as Bitcoin or shares.

See also:

95% Mortgages are back in the UK

Property buyers overpaying to beat the Stamp Duty Holiday

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