Buy now, pay later is often advertised as a way to delay payments on clothing or tools, but one of the UK’s leading charities has reported an alarming increase in people using short-term credit to buy food.
One in twelve Britons now use BNPL to cover daily essentials, according to Citizens Advice, with vulnerable adults relying on the service the most.
It also found that young adults, debits and universal credits were twice as likely to use BNPL for necessities than the general population.
BNPL schemes now offer higher credit limits without a credit check – leaving the financially vulnerable at risk of falling into significant debt, Citizens Advice says
The charity said its frontline advisors had reported increased use of BNPL services, which include Klarna, Clearpay and Laybuy.
She said there were examples where parents used late payment schemes to buy children’s clothes while waiting for the benefit to be paid, for example, and that those in debt were using BNPL to do food stores.
Some companies that offer BNPL payments are also calling customers, some of whom are vulnerable, to tell them that they can increase their credit limits by hundreds or even thousands of pounds.
Citizens advice gave the example of a pensioner, Audrey, who used BNPL in her £40 food shop when money was running out.
Despite struggling to pay off her debts, she said the provider has since bombarded her with offers to borrow hundreds of pounds more.
The pensioner said: either use BNPL or starve, so I used it.
I kind of knew I was going to struggle to make payments but had no other way of getting food. I bought canned food because it is non-perishable and will last longer.
I was struggling to pay back the money. They constantly harass me, calling me for payments. It’s really stressful as if I could pay it off right away, I would.
This company also sends me texts and emails offering a balance of £100 and up to £500. It doesn’t make sense because I can’t even pay £40, how am I going to pay £100 or even £500?
“I’m overwhelmed with offers of higher credit limits.”
Younger customers are also offered higher credit limits.
Lewis, 28, who works for a start-up law firm in London, said he had been offered a credit line of up to £2,000 through a BNPL provider.
He said: I used the buy-now-pay-later service to help buy some furniture when I moved home last year. It’s an expensive process, and I just wanted to split the cost of two items over a three-month period.
Credit cards have the benefit of Section 75 purchase protection, as well as having the potential to improve a person’s credit score if used responsibly.
Since then, I’ve been inundated with offers and notifications of credit limit increases as service providers try to get me to use their services again.
I worked with StepChange a few years ago to help clear my gambling debts, so I’m very careful about how I spend and where I lend in the future. This whole thing seems very predatory to those who may be having financial problems.
If I had still been thousands of pounds in debt when these services were popular I doubt I would have done so.
These companies don’t know my history so I don’t think it’s right for them to offer such high credit limits when they don’t know if the person borrowing will be able to comfortably repay them.
A retiree reports being bombarded with offers for higher buy-now, pay-later credit limits — even though she’s struggling to pay off her initial debt (photo posed by model)
Citizens Advice has called for urgent regulation of the sector, including consistent market-wide affordability checks and for BNPL companies to make the consequences if things go wrong clearer to consumers.
‘The fact that people are going to buy now pay later for groceries really checks the urgency of regulating the industry,’ said Claire Moriarty, CEO of Citizens Advice.
What happens if Buy Now Pay Late debt is not paid on time?
If the BNPL debt is paid on time, many companies do not charge any interest.
But if they are paid late, there is usually a fee to be paid – and if the amount remains unpaid, the provider can use bailiffs to recover it.
The Clearpay terms are as follows: We give you until 11pm the next day to make the payment, after which you’ll incur a late fee for the missed, unresolved payment. This will be an initial amount of £6 and a further charge of £6 if payment is not made within seven days. If you are experiencing difficulties, we have a hardship policy that allows us to work with you to get you back on track.
Laybuy states: If you fail to pay within 24 hours of the due date, we will charge you a default fee of £6. If you do not correct your default by paying the missed installment within the next seven days we will charge you a further default fee of £6. We may also arrange for a debt collection agency to collect from you the amount you owe us.
Clarna says: If you do not pay for your order on time by the due date, you will no longer be able to access Klarna’s payment options for future purchases. For purchases where payments are frequently missed, Klarna may use debt collection agencies to recover your outstanding balance.
According to Citizens Advice, those hounded by bailiffs for arrears can expect to be fined an initial £75 fine.
Failure to pay, which results in a debt collector knocking on your door, can result in a further fine of £235 and a fee of 7.5 per cent on any amount owed over £1,500. This means that a £2,500 debt could result in total penalties of £150.
People unable to settle the debt face paying £110 to get the valuables back and sell them at auction.
With the cost of living rising, we fear that more people in desperate situations will see this unregulated form of credit as the answer.
The government must keep up with these companies and ensure consumers are protected.
Meanwhile, Gillian Percival, a case officer with Citizens Advice Copeland, added: “Buy now, pay later is a double-edged sword.
It can be helpful if you understand what you’re getting into, but if you’re using it out of desperation, you probably have no way of paying back.
We try to help people with food bank and fuel vouchers, but some people are too shy to ask for help if they are struggling. If they use buy now pay later, they are invisible.
They don’t need to talk to anyone, with a few clicks they can borrow instead. They can solve their problems instantly without worrying about the consequences.
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