Quarter of young people using Buy Now Pay Later can’t afford food, rent or bills, Citizens Advice says
A QUARTER of Brits using buy now, pay later (BNPL) services have struggled to afford food, rent or bills, according to Citizens Advice.
New research by the charity has found that 24% of Brits aged 18 to 34 have been unable to pay for monthly essentials due to BNPL repayments.
It comes as 45% of young adults have used the services in the past 12 months, based on a survey of 10,000 people.
Around half (52%) did so without realising and one in three (35%) went on to regret it.
BNPL schemes are often advertised online as an easy way of splitting or delaying payments, with incentives being "interest-free".
But Citizens Advice fears that, for many, such schemes can be a slippery slope into debt.
How to cut the cost of your debt
IF you're in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
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 Citizens Advice found that around two in five people (5.7 million) who had used the schemes in the past year didn't think it was "proper borrowing".
The charity also said four in 10 (41%) people who had used BNPL services in the past 12 months had been struggling to repay.
Online shopper Sharonjit, 32, bought £600 worth of clothes and used a BNPL firm to split up the payments.
When she didn't receive the goods, she cancelled her payment - but she has since found herself chased by a debt collector.
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 BNPL could impact 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."
5 ways to reduce your impulse buying onine
IT'S easy to scroll and spend these days, especially with lockdown having left us with more time on our hands.
Here are some ways you can avoid being tempted:
- Unsubscribe from emails you get from shops
- Turn shopping app notifications off
- Organise all your shopping apps into a folder labelled "spending" and move it as far from your phone's homepage as possible
- Make a shopping list - instead of buying straight away make a list you can review each week, then you can decide what you really want to buy, or if you really want to buy anything at all
- Set limits on your phone - on some devices you can make certain apps unavailable at certain times via screen time settings
Citizens Advice is now urging BNPL firms to overhaul their checkout processes to ensure shoppers aren't encouraged to overspend.
The charity will share its research with the Financial Conduct Authority (FCA), which has announced such firms will be regulated.
Klarna, Clearpay and Laybuy are just some of the lenders offering BNPL financing.
But the research doesn’t name any lender in particular and talks about the services as a whole.
Alistair Cromwell, acting chief executive of Citizens Advice, said: "BNPL 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."
Alex Marsh, head of Klarna in the UK, told The Sun the Citizens Advice report "doesn't represent the experiences" of the 12million consumers who choose the firm's services each year.
He added: "We make it crystal clear for our consumers at check out that this is a credit product and we perform a credit check each time they use our service."
Meanwhile, a Laybuy spokesperson said: "We have never used influencers to market our products, we are never the default option at checkouts and we're the only provider in the UK to conduct hard credit checks on customers to ensure they can afford to pay."
And Andy Harding, UK managing director of rival Openpay, said: "Not all BNPL companies operate in the same way.
"Openpay has never run a marketing campaign specifically targeting young people and Openpay is never the default payment option at checkout - a practice that can lead to people using BNPL services unwittingly."
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The use of BNPL products nearly quadrupled in 2020 and is now at £2.7billion, with five million shoppers using them since the start of Covid.
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Reality stars and Instagram celebs have been slammed for plugging the schemes to their young followers on social media, without outlining the risks.
Parents were also warned not to use the service to purchase Christmas presents over fears they wouldn't be unable to repay the costs.