Debt fears for one in three buy now, pay later buyers as more families turn to lenders to cope

0

Debt sucks for one in three buyers now, pay later as it appears more and more families are turning to lenders to cope

  • Retailers have seen an increase in the use of Klarna or Clearpay payment plan services
  • The unregulated buy it now and pay later industry has exploded to a value of billions of pounds
  • And the average borrower now repays 4.8 purchases at a time, up from 2.6

A third of buyers who buy now, pay later have “unmanageable debt” as they increasingly turn to lenders to meet the rising cost of living.

Retailers have seen an increase in the use of services such as Klarna and Clearpay, which allow payments to be spread over weeks or months.

And the average borrower is now paying off 4.8 purchases at a time, down from 2.6 in February, according to Barclays and charity StepChange, with some shoppers even using the offers to buy groceries.

Estimated at £6 billion, the unregulated buy it now and pay later (BNPL) industry has exploded in recent years. More than 17 million people are thought to use lenders, who offer interest-free credit online and in stores. Critics fear BNPL is encouraging shoppers to spend more than they can afford.

Earlier this week, ministers confirmed that lenders will have to carry out financial capability checks. But that may not happen until 2024, with campaigners accusing the Treasury of not moving fast enough.

A third of buyers who buy now, pay later have “unmanageable debt” as they increasingly turn to lenders to meet the rising cost of living. Retailers have seen an increase in the use of services such as Klarna (pictured) and Clearpay, which allow payments to be spread over weeks or months

Barclays and StepChange want companies to do more to protect customers. Antony Stephen, from Barclays Partner Finance, said: “Retailers are a key gatekeeper in the lending process and it is crucial that they carry out due diligence on BNPL products.

“As tempting as it may be to evaluate BNPL payments solely on their acceptance rates or merchant fees, they need to go a step further and examine how accountable the lending process is to each transaction.”

A poll by the bank and charity found the average BNPL borrower had debts of £254 – 31% said repayments were “unmanageable”.

Retailers offering BNPL told researchers they would finance almost a quarter of all sales by the end of 2022. Nine out of ten businesses also reported an increase in demand for the services since the start of the year.

Richard Lane of StepChange said: “There is evidence that BNPL is not only used to buy discretionary items, but also essentials like groceries. Just because it’s short-term and interest-free doesn’t mean it doesn’t contribute to problematic debt.

A Treasury spokesman said it was committed to ensuring BNPL’s regulation was “proportionate and effective”.

Advertising

Share.

Comments are closed.