‘Buy now, pay later’ (BNPL) schemes need “a drastic overhaul” after a damning report found that a quarter of young users struggled to pay for food, rent and other bills.
Citizens Advice, a network of 316 independent charities throughout the UK, published new data today laying bare the scale of financial issues young people run in to after using delayed payment services.
According to its data, a whopping 45 per cent of 18 to 34-year-olds have used a BNPL scheme over the past 12 months.
Shockingly, 52 per cent of those young adults said they did so without realising it, while a further 35 per cent said they went on to regret doing so.
Of the shoppers who have used a BNPL service over the past 12 months, 41 per cent said they had been struggling to make the repayments, while 24 per cent of young shoppers said they had struggled to pay for food, a phone bill, an energy bill, an internet bill, a water bill, council tax, rent, essential toiletries or make other repayments.
Citizens Advice says that the average UK user was paying back around £63 a month, but around 40 per cent said they did not think it was “proper borrowing”.
“Buy now, pay later borrowing can be like quicksand – easy to unwittingly slip into and much more difficult to get out of,” Citizens Advice’s acting chief executive Alistair Cromwell said.
“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.”
It comes as the government ramps up scrutiny of the BNPL sector, which has risen to prominence thanks to brands like Klarna and Clearpay, announcing that they will now be regulated by the Financial Conduct Authority (FCA).
Under the FCA’s new regulations, firms will be required to conduct thorough affordability checks before approving a customer.
A Treasury spokeswoman said: “Buy now, pay later can be a helpful way to manage your finances but it’s important that consumers are protected as these agreements become more popular.
“By stepping in and regulating, we’re making sure people are treated fairly and only offered agreements they can afford.”