A quarter of regular buy now, pay later users are behind on their bills and debt repayments, latest figures show.
The payment method has boomed during the cost of living squeeze, contributing to thousands of shoppers falling into a ‘spiral of debt’.
Around 14million people in the UK – 27 per cent of adults – used the form of credit in the six months to January 2023. Almost 2million are regular users, paying through buy now, pay later (BNPL) at least ten times within 12 months, according to the financial regulator.
BNPL allows shoppers to defer payments for a month or split the total into smaller interest-free instalments. But the sector is unregulated and has faced criticism for slack affordability checks and allowing vulnerable customers to get into debt.
A quarter of regular buy now, pay later users are behind on their bills and debt repayments, latest figures show (File image)
Charities and MPs have urged the Government to speed up the introduction of new, tougher rules to protect consumers. Financial Conduct Authority (FCA) figures published today reveal more than a quarter of regular BNPL users have missed a bill or debt repayment in three of the last six months, totalling 529,200 people.
And 48 per cent – 940,800 – also had a high-cost credit product such as a payday loan. More than half had increased their credit card debt in the last year, accounting for some 1million consumers.
Katja Oakley-Bell, financial planning expert at wealth management firm Quilter, said BNPL can be a ‘catalyst for someone falling into a spiral of debt’ and can ‘instil a false sense of security, leading individuals to accumulate debt without feeling the immediate weight of their choices’.
According to the FCA, 27 per cent of UK adults used BNPL at least once in the six months to January 2023 – up from 17 per cent in the 12 months to May 2022.
Richard Lane, director of external affairs at debt charity Stepchange, said: ‘Given the immense financial strain so many people have been under for the past two years, it’s no surprise to see the use of BNPL on the rise.’
BNPL allows shoppers to defer payments for a month or split the total into smaller interest-free instalments (File image)
Ministers published draft legislation on BNPL regulation earlier this year, including crackdown on advertising and stronger consumer rights. However, the new rules are yet to be introduced.
Mr Lane added: ‘We urge the Government to bring about this regulation as soon as possible. Putting struggling consumers first is the right thing to do.’
Labour MP Stella Creasy said: ‘Today’s data confirms what many of us tried to warn about for years now – BNPL companies are driving a personal debt crisis that will far outstrip the one created by payday lenders like Wonga.
‘If there’s nothing in the Kings Speech to tackle this then Parliament must intervene urgently to override a government that refuses to act, or our constituents will face decades of destitution at the hands of these legal loan sharks and no one should forgive us.’
The FCA said yesterday that it has used the Consumer Rights Act to secure changes to ‘potentially unfair and unclear’ contract terms in the sector.