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Citizens Advice Response to HM Treasury Consultation ‘Regulation of Buy-Now-Pay-Later’

6 Ionawr 2022

We welcome the opportunity to respond to these proposals on Buy Now Pay Later (BNPL) regulation. BNPL is now a significant segment of the consumer credit market, with transactions worth £2.7 billion last year. In a very short space of time, BNPL has become a standard payment option for retail purchases, particularly those made online. Around 5 million people in the UK used a BNPL product in 2020 with this number expected to grow, and for some people it has become their default option for purchases. 1 in 10 people who use BNPL now say that they always use it when it’s available.  

The image of Buy Now Pay Later as primarily a feature for clothes has never been fully accurate - in early 2021 we found it was used more frequently for electronics, and only a slightly smaller proportion of people used it for white goods compared with clothes. But as the market has boomed, it's increasingly normalised as a standard way to manage your money. Already, BNPL shopping apps can now be used regardless of retailers, and products like Klarna Card can be used offline as well as digitally. Indicating the wider direction of travel, the US version of Microsoft's newest browser offered a BNPL extension as standard.

Amid rising living costs, we're seeing delayed payments marketed as a way to make ends meet. One brand offers "Tesco Now. Pay Later". Another tells customers to “[n]ever worry about doing your food shopping with the helping hand of credit”, highlighting “absolutely no credit checks” as part of their offer.

While splitting and delaying payments will undoubtedly work for some people in some contexts, our research into the design and use of BNPL highlights the widespread risk in this rapidly expanding market. Of people who had used BNPL in the previous year, 39% had used it without realising and 42% didn’t fully understand what they were signing up for. 1 in 10 of those who've used BNPL ended up chased by debt collectors - just over half of whom have subsequently turned to another form of borrowing to pay off their debt, such as a credit card or loan. 2 in 5 users have been unable to pay for essentials such as food, rent or bills because they were making payments for a BNPL product. Ultimately, a quarter of those who use Buy Now Pay Later go on to say they regret doing so. As the market continues to expand, there is a risk that these existing issues will be felt more widely.