A new study shines a light on the growing buy now, pay later debts held by UK consumers, and the effect this is having.

A new study reveals that UK consumers have accumulated £4.1 billion of buy now, pay later debt during the course of 2021. Furthermore, this £4.1 million is just the amount left to repay, with shoppers having actually spent £5.8 billion using BNPL since January.

The research was conducted by Credit Karma, a company which seeks to provide consumers with access to their credit file. It also suggests that there are 11.6 million BNPL users in the UK, and that 7.7 million people have “significant” BNPL debt, with the average person’s borrowing being £538.
45% of respondents said they had fallen behind with repayments, with 31% saying that their credit score had been adversely affected. Around one-third also said that they believed that their BNPL situation had hampered their ability to obtain a mortgage or other credit.
40% of those surveyed thought it was too easy to obtain BNPL credit. Credit Karma also believes that 48% of BNPL purchases concern ‘non-essential’ items.
The survey also suggests that 31% of individuals plan to use BNPL when doing this year’s Christmas shopping.
Ziad El Baba, general manager at Credit Karma, said:

Buy now, pay later services can be a great tool for people who wish to make a purchase and break up their payments into smaller, more manageable amounts.

However, borrowers must be cautious about how much debt they take on via buy now, pay later and make sure they’re able to follow through with the terms of the arrangement. This is especially important since missing a payment can have a negative impact on your credit score, which can make borrowing more costly for consumers down the line.

The findings come a few days after the Government commenced its consultation into the framework that will be used by the Financial Conduct Authority to regulate the BNPL sector. No date has yet been set for this regulatory switch-over.
The Credit Karma research prompted consumer organisation Which? to call for the Government to accelerate the timetable for FCA regulation of BNPL.

Gareth Shaw, Which? Head of Money, said:

Our research shows that shoppers are being bombarded with Buy Now, Pay Later (BNPL) schemes at the biggest retailers, often with no information or warnings about the risks of late fees or getting into debt, so it’s very concerning to see such a huge amount of debt related to these schemes.

This demonstrates why there should be no further delay to plans for BNPL regulation, which should include much greater marketing transparency, information about the risks of missed payments and credit checks before consumers are cleared to use BNPL providers.

Lending and Debt Management continue to be growth industries and it is as business critical as it has ever been for retailers to be authorised to broker credit. At Scott Robert we have helped a large number of Credit Brokers, lending and debt management firms obtain FCA Authorisation and we partner with many authorised firms providing a full suite of tailored compliance services.

Speak to one of our experts today to find out more by calling 0161 914 5727.