Citizens Advice warning as many turn to buy now pay later to fund Christmas

More than a quarter of UK adults say they are likely to use buy-now-pay-later (BNPL) to help ease spending over the festive period, Citizens Advice has found.

The charity said it was braced to provide debt support in the New Year as some 28% of consumers – the equivalent of 15.1 million people – plan to use the unregulated credit for Christmas spending, rising to 56% of parents with primary school-age children.

The advisory service warned that those now unable to cover the costs of essentials such as groceries and bills were more likely to have been a regular user of BNPL in the last 12 months.

It found that 11% of BNPL users used the product to pay for groceries, jumping to 35% of those who used BNPL regularly.

Citizens Advice, MoneySavingExpert and Which? recently teamed up to urge the Government to protect BNPL users after its commitment to regulating the industry in 2021 appeared to have stalled.

Citizens Advice warned that continued delays were putting consumers – many already facing tough financial situations – at risk of being exposed to unmanageable levels of debt and even bailiff action.

This was because BNPL lending does not require any affordability checks, unlike other credit options.

The charity found 21% of BNPL users have missed or made a late BNPL payment in the last 12 months, with one in 10 of this group visited by an enforcement agency or bailiff as a result.

Almost a third of BNPL users (29%) who were due to make a payment in the last month borrowed money to repay their instalments, meaning their initial debt was only leading to more debt.

The charity said it had seen a 67% increase in people seeking its help with BNPL debt in the last 12 months.

It is now calling on the Government to bring forward regulation of the BNPL sector.

Citizens Advice chief executive Dame Clare Moriarty said: “The number of people turning to BNPL, and falling into debt as a result, underlines the urgent need for regulation.

“With so many households already on the financial ropes, BNPL borrowing for extra Christmas costs risks delivering the knockout blow.

“This should set off alarm bells for the Government, whose dithering on regulation of the sector has gone on for too long. As the use of this form of credit soars, the impact of its lack of regulation becomes impossible to ignore.

“Consumers are being failed and as a result could see a 2024 plagued with unmanageable debt, poor credit, and bailiffs knocking at their door.

“The Government must act on its almost three-year-old pledge and bring the BNPL market into line urgently.”

Opinium surveyed 2,156 UK adults on the use of BNPL products and Christmas spending in the period November 1-3 and 2,132 UK adults who had purchased anything using a BNPL product in the last 12 months between November 6 and 15.

An HM Treasury spokesman said: “When used appropriately, buy-now-pay-later can be a useful, interest-free way for consumers to manage their finances.

“We must ensure that regulation of these products is proportionate to ensure borrowers are protected without unduly restricting access.

“We will publish a response to our recent consultation once it is finalised.”

Published: 30/11/2023 by Radio NewsHub