Two-fifths borrowed to repay Buy now Pay later
More than two in five Buy Now Pay Later (BNPL) customers have borrowed money to make repayments, Citizens Advice found.
Types of borrowing included overdrafts, borrowing from friends and family, loans, and payday loans. The most popular was credit cards (26%).
Young buyers were the most likely to borrow to repay BNPL purchases.
The charity found that 51% of 18-34 year olds had borrowed money to pay off BNPL debt, compared to 39% of 35-54 year olds and 24% of over 55s.
These latest findings come as the BNPL market continues its meteoric growth. But the sector remains unregulated.
Citizens Advice is calling for regulation to protect customers, including market-wide accessibility checks and clearer information at tills.
Worryingly, the charity found that more than 1 in 10 Buy Now Pay Later customers did not fully understand how refunds would be set up.
Millie Harris, debt adviser at Citizens Advice, said:
“Most people I talk to who use Buy Now Pay Later live off overdrafts and credit cards, so they use them for repayments. It’s just leaning on one debt to pay off another debt.
“It’s heartbreaking to see parents who can’t afford to buy clothes or shoes for their children turn to Buy Now, Pay Later thinking it’s doing them a favor. In reality, it’s just more debt and more creditors, on top of what they already face.
“What scares me the most is how easily people can use Buy Now Pay Later. They come to use it much faster than other forms of credit. It’s just a few clicks away Too often that means people don’t realize how serious it is, that it’s a credit and there are consequences if they don’t pay it back.
Dame Clare Moriarty, Managing Director of Citizens Advice, said:
“Buyers are piling up loan after loan and sinking into increasingly desperate situations from which it may seem impossible to escape.
“The spiral of debt from Buy Now Pay Later to credit cards, loans and even payday lenders shows that this is not a risk-free alternative. Buy Now Pay Later is part of the credit industry and urgently needs to be regulated as such.