A new report has shed light on a concerning trend within the buy-now-pay-later (BNPL) industry, revealing that a significant number of BNPL customers in the UK are resorting to additional borrowing, such as credit cards, to repay their debts. The survey, conducted by charity Citizens Advice, surveyed 2,288 individuals who had used BNPL services in the past year. Alarmingly, over 40% of these shoppers admitted to relying on various forms of borrowing to cover their repayments.

This revelation highlights the urgent need for comprehensive regulation in the BNPL sector. Consumers’ inclination to pile up borrowing on top of borrowing raises concerns about the potential risks and consequences they may face. Prompted by this information, there have been calls for the government to take action and enforce regulations that protect consumers’ financial well-being.

The survey also found that younger shoppers between the ages of 18 and 34 were the most likely to turn to borrowing in order to pay off their BNPL debts. A staggering 51% of individuals in this age group admitted to resorting to additional borrowing for their repayments.

Credit cards emerged as the most popular form of borrowing to cover BNPL debts, followed by overdrafts, loans from friends and family, and personal loans and payday loans.

BNPL services have gained popularity among consumers due to their flexibility and convenience. They allow customers to split the cost of their purchases into installment payments without any interest or charges, as long as they meet the payment deadlines. However, late payments can result in additional fees imposed by certain BNPL firms.

In response to growing concerns about consumer protection, the UK government plans to regulate the BNPL industry through the Financial Conduct Authority (FCA). The proposed regulations, expected to be implemented later this year or in 2023, will introduce affordability checks conducted by participating firms and provide clearer information at online checkouts. Citizens Advice is urging the government to ensure that these regulations are comprehensive and effective in safeguarding consumers from the risks associated with BNPL borrowing.

In the UK, Klarna and Clearpay are two of the leading BNPL firms; however, there are other significant players in the market, including Laybuy and Zilch. Furthermore, tech giant Apple has recently revealed its plans to introduce a BNPL feature for iPhones in the US, with a potential launch in the UK before the end of the year.

As the BNPL industry continues to grow and gain traction, it is crucial for regulations to be established to protect consumers from falling into unsustainable debt. The findings of this report underscore the need for immediate action, and it is hoped that the upcoming regulations will effectively address these concerns and ensure a fair and responsible BNPL market.

For more information on BNPL and its impact on consumer finances, you can visit the following links:
1. Citizens Advice – Citizens Advice is a charity that provides free advice to help individuals make informed decisions and resolve issues related to finances.
2. Financial Conduct Authority (FCA) – The FCA is the regulatory body responsible for overseeing the conduct of financial firms in the UK. Their website offers resources and information on various financial matters, including BNPL and consumer protection.