Growing ‘Buy-Now-Pay-Later’ Crisis Charity Warns

Growing ‘Buy-Now-Pay-Later’ Crisis Charity Warns

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.

However, Citizens Advice said many consumers regretted using it.

The charity network did not want to name BNPL firms, but called for tougher regulation.

It found that 45% of 18-to-34 year olds have used the payment option in the last 12 months.

The repayment option is often 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”.

However, the charity network said it can be a “slippery slope into debt”.

The charity network said that, 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.

The average person was repaying £63 a month, but CA found 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.

The BBC reported that a lady who signed up for more than she expected is Sharonjit, whose story was cited by Citizen’s Advice as an example of the trouble people can get into.

Aged 32, she bought £600 worth of clothes and used a BNPL firm to pay in instalments. She didn’t receive the goods and cancelled her payment to the firm while she waited for the issue to be resolved by the retailer.

She said: “The whole thing has been so stressful. I’m constantly on edge. I’ve just been barraged with calls, emails and letters from a debt collector – all for buying some clothes online.

“The firm said they were referring me on to someone and I had no idea it was a debt collector. I had no idea buy-now-pay-later could [hit] my credit score.

“I’ve never had issues shopping this way before. But this time it’s like as soon as something went wrong they’ve washed their hands of me.”

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.

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.

Other Money News

City of London Plans To Convert Thousands Of Office Into Residential Units As Workers Stay 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!

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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