Buy now, pay later boom sends thousands into a ‘spiral of debt’ as a quarter of users fall behind on their bills and debt repayments

A quarter of users who regularly buy now and pay later are behind on bills and debts, the latest figures show.

The payment method has boomed amid cost-of-living pressures, sending thousands of shoppers into a ‘spiral of debt’.

About 14 million people in Britain – 27 percent of adults – used the form of credit in the six months to January 2023. Nearly 2 million are regular users, who pay at least ten times within twelve months via Buy Now, Pay Later (BNPL). according to the financial regulator.

BNPL allows customers to defer their payments for a month or split the total into smaller interest-free installments. But the sector is unregulated and has been criticized for lax affordability controls and allowing vulnerable customers to fall into debt.

A quarter of users who regularly buy now, pay later are behind on bills and debt repayments, latest figures show (Stock 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 show that more than a quarter of regular BNPL users have missed a bill or debt repayment in three of the past six months, amounting to a total of 529,200 people.

And 48 percent – ​​​​940,800 – also had an expensive credit product such as a personal loan. More than half had increased their credit card debt in the past year, representing about 1 million consumers.

Katja Oakley-Bell, financial planning expert at wealth management firm Quilter, says BNPL can be a “catalyst for someone falling into a debt spiral” and “create a false sense of security, allowing individuals to accumulate debt without the immediate to feel weight’. of their choices’.

According to the FCA, 27 percent of British adults used BNPL at least once in the six months to January 2023 – up from 17 percent in the 12 months to May 2022.

Richard Lane, director of external affairs at debt charity Stepchange, said: ‘Given the enormous financial pressure so many people have been under over the past two years, it is no surprise that the use of BNPL is increasing.’

BNPL allows customers to defer their payments for a month or split the total into smaller interest-free installments (Stock Image)

Ministers published draft legislation on BNPL regulations earlier this year, including a crackdown on advertising and stronger consumer rights. However, the new rules have yet to be implemented.

Mr Lane added: ‘We urge the Government to deliver this scheme as quickly as possible. Putting struggling consumers first is the right thing to do.”

Labor MP Stella Creasy said: ‘Today’s data confirms what many of us have been trying to warn about for years: BNPL companies are causing a personal debt crisis that will be far greater than the crisis created by lenders like Wonga.

‘If there is nothing in the Kings Speech to address this, Parliament must act urgently to overthrow a government that refuses to act, otherwise our voters will face decades of poverty 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.