One in 10 Buy Now Pay Later shoppers have been chased by debt collectors
One in 10 Buy Now Pay Later shoppers have been chased by debt collectors, rising to one in eight young people, Citizens Advice is warning.
Millions of shoppers in the UK use Buy Now Pay Later to split or delay payments. But Citizens Advice fears for many people it can be a slippery slope into debt.
The charity’s latest research shows Buy Now Pay Later (BNPL) shoppers were charged £39 million in late fees in the past year.
Of those who were referred to a debt collector for missed payments, 96% experienced a negative consequence. They reported at least one of the following: sleepless nights; ignoring texts, emails and letters in case they were about debts; avoiding answering the door; borrowing money to repay the debt; or their mental health getting worse.
Yet the charity found that not one of the BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments. Instead this was only flagged in the T&Cs on a separate page, if at all. Citizens Advice conducted mystery shopping at 100 leading retailers and found 38 offered BNPL, with 22 offering more than two BNPL options, meaning there were a total of 74 BNPL checkouts.
The research also found that out of those offering BNPL, only 11% warned shoppers they were taking out a credit agreement, the remaining 89% put this information in the small print or T&Cs.
Citizens Advice asked the BNPL firms featured in the research if they ever referred customers to debt collectors. Klarna, Clearpay, Laybuy and Openpay confirmed they do this as a last resort. Splitit said it doesn’t. PayPal refused to comment.
Citizens Advice is calling on the Treasury to urgently regulate BNPL as it fears shoppers have been left unprotected and ill-informed during the rapid expansion of the sector.
‘I couldn’t sleep after being contacted by debt collectors over a box of plants’
Liz* was trying to buy plants online, but struggled to find the postage cost when clicking around the checkout and so decided to abandon her purchase. The keen gardener, who is in her 60s, was surprised to receive an email saying she’d signed up to a BNPL agreement, and tried to cancel her order.
She said: “I really don’t understand how I ended up paying for my plants through Buy Now Pay Later. I didn’t understand what it was. Then I get these threatening emails saying they’re going to contact debt collectors, and then I got a letter from a debt collector.
“I couldn’t sleep, I lay awake worrying that someone was going to turn up to my house and start taking things*. I have a number of health issues and I was worried this was going to make me ill again. It was eventually resolved, but at great stress to me.”
Citizens Advice fears that even where people opt for BNPL, they may not understand the consequences of doing so.
Millie Harris, a Debt Adviser at Citizens Advice East Devon, said:
“My concern is that people aren't processing the fact that Buy Now Pay Later is credit. They don't realise there are going to be consequences if they don't pay - it gives them a false sense of security.
“I’ve seen people using it for their kids’ clothes and shoes that they would otherwise never be able to afford. They are taking out what is effectively a loan, but they don't see it as one. For example, I helped someone who has tens of thousands of pounds of debt, but they don't see Buy Now Pay Later as part of that total.
"It's almost under-the-radar debt.”
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
“The sheer number of shoppers facing debt collection is startling. We know from our frontline advisers just how much stress this can cause.
“A seamless Buy Now Pay Later checkout process should not mean shoppers have to dig around in the small print to find out they’re taking out a credit agreement, and could be referred to debt collectors if they can’t pay. The warnings should be unmissable.
“The Buy Now Pay Later industry has exploded and we need consumer protection to keep up with the changes in the way we live. We hope the Treasury can keep pace.”
Notes to editors
Opinium carried out a nationally representative survey of 2,003 adults in the UK who’ve used Buy Now Pay Later in the last 12 months, between 22 and 29 July. 932 respondents were aged 18-34. Questions respondents were asked included:
How have you been contacted about your debt? 195 said they had received a letter, text or phone call from debt collectors or had been referred to debt collectors. 110 18-to-34 year olds said yes.
In total, how much have you been charged in late fees for Buy Now Pay Later payments over the last 12 months? 199 people said an average of £27.25186 which has been extrapolated to £38,911,263.
The last time you were referred to a debt collector by a BNPL provider or received a letter, text or phone call from a debt collector the following happened, which did you experience as a result? 96% ticked at least one of the following: Had sleepless nights, Ignored texts, emails, letters or calls in case they were about my debts, Did not answer my door in case it was debt collection/bailiffs, Borrowed money from family or friends to pay off the debt, Borrowed money from a bank to pay off the debt, Used my credit card to pay off the debt, Used a loan to pay off the debt, Used my overdraft to pay off the debt, My mental health got worse.
Citizens Advice conducted mystery shopping at the top 100 retailers included in the RXUK Top 500 list between 14 July and 3 August. 38 retailers offered BNPL, with 22 offering more than two options, meaning there were a total of 74 BNPL checkout options. The research also found that out of those offering BNPL, only eight BNPL checkout pages warned shoppers they were taking out a credit agreement, the remaining 66 put this information in the small print or T&Cs.
Liz’s name has been changed to protect her identity.
Debt collectors do not have the same powers as bailiffs/enforcement agents. A debt collector has no rights to take belongings and is not a bailiff. They do not typically come to your home (although some do). A bailiff will usually only be sent after some form of court action, for instance, when the creditor has obtained a County Court Judgement.
A Buy Now Pay Later Debt cannot be passed to bailiffs/enforcement agents unless there is an unpaid court judgment. See the Citizens Advice website for more information on bailiffs.
Citizens Advice is made up of the national charity Citizens Advice; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.
Our network of charities offers impartial advice online, over the phone, and in person, for free.
We helped 2.4 million million people face to face, over the phone, by email and webchat in 2020-21. And we had 40 million visits to our website. For full service statistics see our monthly publication Advice trends.
Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,600 service outlets across England and Wales.
You can get consumer advice from the Citizens Advice consumer service on 0808 223 1133 or 0808 223 1144 for Welsh language speakers.