One in 10 buy now, pay later shoppers chased by debt collectors

interactive investor comments on Citizens Advice’s latest buy now, pay later research.

New research by Citizens Advice published today revealed one in 10 Buy Now Pay Later (BNPL) shoppers have been chased by debt collectors, rising to one in eight young people.

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Buy now, pay later is a type of borrowing that feeds into the YOLO (you only live once) culture we live in, which demands instant gratification at all costs. It is like a drug that encourages consumers to buy things they simply can’t afford.

“While people of all ages are not immune to the allure of such schemes, they are often targeted at younger generations through advertising on Instagram and other social media platforms - via influencers in some cases. BNPL has now emerged as a solution for people to buy coveted clothing and must-have gadgets owned by their idols without having the cash in the bank to fund these purchases in full.

“While it might be tempting to delay payment – and the adverts can be very enticing and sometimes misleading - it can be a slippery slope into debt.

“The BNPL industry is in the sights of the Financial Conduct Authority, which expressed a strong and pressing case for regulation of BNPL businesses in its review into the unsecured credit market published early this year.

“The BNPL market is now too big to overlook, with the use of such products having nearly quadrupled in 2020 to reach £2.7 billion, according to the City watchdog. Regulation can’t come soon enough.

“The explosion of this form of lending in recent history underlines the importance of financial education from a young age. While debt is not inherently bad, knowledge on how to get a handle on it is crucial.”

Other notable findings from the research

• 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. 
• Out of those leading retailers 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.