British shoppers are facing a £4 billion buy now pay later hangover

Brits will owe billions of pounds in the new year after using 'Buy Now, Pay Later' (BNPL) to finance Christmas.

Analysts estimate that consumers will spend almost £4 billion with BNPL lenders over the festive period, which would be 8.8 percent more than last year.

This will bring the total amount spent in 2023 to £17 billion, more than a quarter more than in 2022.

Amid fears this will lead to a painful debt hangover in January, campaigners say consumers should 'think carefully before using BNPL'.

Pressure is mounting on ministers to speed up new rules for the sector, three years after plans for regulation were first announced.

At BNPL, consumers can shop with the agreement to pay within a certain period or in installments.

Providers claim it offers consumers choice and is a responsible form of borrowing.

But critics argue that the unregulated industry can trap people in a spiral of debt because affordability controls are not strict enough.

Helen Ganney, from debt relief charity Christians Against Poverty, said Christmas can be a “really stressful, anxious time” for struggling families.

She said: 'Buy now, pay later can seem like an attractive way to pay for all the things we'd like to buy at Christmas, but the 'later' part comes quickly and has to be paid back.

It is concerning that these products are not currently regulated by the Financial Conduct Authority, as other lenders are.”

According to the latest research from Adobe Analytics, consumers will spend £3.7 billion this festive season through the likes of Klarna, Laybuy and Clearpay.

That will take the total to £17.2 billion by 2023 – an increase of 26 percent on last year.

Debt advice organization Money Wellness said customers were regularly asking for help with 20 or more BNPL accounts.

“The pressure to get the best gifts, cook a big meal or throw the perfect party is real,” says Sebrina McCullough, director of external affairs for Money Wellness.

'But consumers should think carefully before using BNPL whether they can afford to make the repayments in the new year.

We are certainly preparing for an increase in the number of people seeking free debt help in January and February as a result of BNPL's spending this Christmas.”

Debt relief charity Step Change, which said January will be its busiest period, warned that households will feel the pressure this year 'as the cost of living crisis hits'.

Spokesman Richard Lane said advertising “implies that a happy Christmas involves spending money,” but added: “Your loved ones wouldn't want you to suffer financially after the celebration is over.”

Ministers pledged to regulate the sector in 2021 and published draft legislation earlier this year.

The new rules, which include stricter advertising restrictions and stronger rights for consumers, have yet to be implemented.