One in 10 or about 10% of Buy Now Pay Later (BNPL) buyers have been contacted by debt collection agencies, and that figure rises to one in eight for younger consumers, according to Advice to citizens.
The Citizens Advice charity shared research results which reveal BNPL consumers were charged £ 39million in late fees over the past year.
Of the clients who had been referred to a debt collection agency for missed or missed payments, 96% experienced some type of negative consequence. Consumers reported experiencing at least one of the following events: sleeplessness; ignoring text messages, emails and letters in case they were related to their outstanding debt; try not to answer the door; borrow funds to repay their debt; or their mental health deteriorates.
However, the association reveals that none of the BNPL checkouts on major retailer sites have warned consumers that they may be referred to debt collection services for missed payments. These types of potential issues were just mentioned in the Terms and Conditions section on a separate page (if applicable).
Citizens Advice did mystery shopping at 100 major outlets and learned that 38 of those stores supply BNPL, 22 having more than two different BNPL methods, meaning there were 74 BNPL checkouts in total.
The research study further found that among those who provided BNPL, only 11% warned consumers that they were actually taking out a credit agreement, the remaining 89% mentioned these details in the fine print or terms and conditions.
Dame Claire Moriarty, CEO of Citizens Advice, said:
“The sheer number of buyers facing debt collection is surprising. We know from our frontline counselors how stressful this can be. A seamless buy now, pay later payment process shouldn’t mean buyers have to dig through the fine print to find they are taking out a credit agreement, and could be referred to debt collectors if they can’t. not pay. Warnings should be inescapable.
Citizens Advice asked BNPL companies covered by the research report if they had ever referred clients to debt collection companies. Clearpay, Klarna, Laybuy and Openpay have said they must take this step as a last resort. Splitit noted this was not the case, while PayPal declined to comment.
The charity is now asking the UK Treasury to monitor and strictly regulate BNPL’s services over concerns that consumers will be unprotected and misinformed as the industry continues to grow aggressively.
Millie harris, debt advisor at Citizens Advice East Devon, noted:
“What concerns me is that people don’t take into account that Buy Now Pay Later is a credit. They don’t realize that there will be consequences if they don’t pay – it gives them a false sense of security. I have seen people use it for their children’s clothes and shoes that they otherwise would never have been able to afford. They take out what is effectively a loan, but they don’t see it as such. For example, I have helped someone who has tens of thousands of pounds in debt, but does not consider Buy Now Pay Later in that total. It’s almost a debt under the radar.