Citizens Advice, a UK-based network of legal, money and consumer groups, has recently sounded the alarm regarding Buy-now-pay-later (BNPL) schemes, saying that many users were getting into debt and struggling to pay for food and bills.
In a recent research, Citizens Advice found that It found that 45 percent of 18-to-34 year olds have used the payment option in the last 12 months. The charity network said that, overall, 27 percent of UK adults have used these firms in the last 12 months, rising to 37 percent of disabled people and 45 percent of people with a mental health problem.
The average person was repaying 63 pounds a month, but Citizens Advice found almost two-in-five (5.7 million) who have used BNPL in the last year didn’t think it was “proper borrowing” and six million didn’t fully understand what they were signing up for.
And the charity warned that 4 in 10 of those who’ve used BNPL in the last 12 months are struggling to repay. It also unveiled that a quarter of consumers regretted paying using these platforms, frequently saying they cannot afford repayments or are spending more than they expected.
Citizens Advice said firms must overhaul their checkout processes and improve affordability checks. Notably, the charity network did not want to name BNPL firms, it has called for tougher regulation. Alistair Cromwell, acting chief executive of Citizens Advice summed it up and said that “This industry more than trebled in 2020, and while these products work for many shoppers, the regulator has rightly recognised the potential for harm. It must ensure robust consumer protection keeps pace with changes in how we shop.”
Responding, Alex Marsh, UK head of leading BNPL firm Klarna stressed that “There is now a variety of buy now pay later providers in the market and the findings in this report do not represent the experiences of the more than 12 million consumers who choose to use Klarna’s interest free, fee-free services each year.”
Similarly, Andy Harding, Openpay’s UK managing director of payments highlighted that “Openpay has never run a marketing campaign specifically targeting young people and Openpay is never the default payment option at checkout - a practice that can lead to people using BNPL services unwittingly.”