According to a recent report released by charity organization Citizens Advice, a concerning trend in the UK is emerging, as more than 40% of consumers who utilize buy-now-pay-later (BNPL) services are resorting to credit cards and other forms of borrowing to repay their debts. The Guardian newspaper highlighted these findings, emphasizing the urgency for regulating BNPL services.
The survey, which involved 2,288 individuals who use BNPL, revealed that 42% of respondents turned to borrowing as a means to finance their repayments. Among the various borrowing methods used, credit cards were the most popular, followed by overdrafts, borrowing from friends and family, and personal loans and payday loans.
Interestingly, the younger demographic, particularly those aged 18-34, displayed a higher tendency to borrow money to pay off their BNPL debts. In fact, more than half of respondents within this age group admitted to resorting to borrowing for this purpose.
BNPL services enable customers to make payments for their purchases in installments, interest-free and without any additional charges. However, if the debt is not repaid within the agreed-upon timeframe, companies may impose late fees. Typically, the total cost of the purchase is divided into weekly, fortnightly, or monthly installments.
To address the concerns surrounding BNPL, the Financial Conduct Authority, which is under the control of the UK government, plans to introduce regulations for these services. The new regulations are expected to take effect later this year or in 2023. Citizens Advice is advocating for the inclusion of affordability checks by all participating firms, as well as the provision of clearer information at online checkouts to promote responsible borrowing.
Currently, some well-known BNPL firms operating in the UK include Klarna, Clearpay, Laybuy, and Zilch. However, it is important to note that technology giant Apple is also planning to introduce a BNPL feature for iPhones in the United States, with a potential launch in the UK by the end of this year.
For more information on responsible borrowing and managing debts, you can refer to the following useful links:
1. Money Advice Service – Debt and Borrowing
2. Citizens Advice – Borrowing Money
