Research by national charity Citizens Advice shows that one in ten consumers who have used buy now, pay later arrangements has been chased by debt collectors. This figure rises to one in eight amongst survey respondents aged 18 to 34.

Citizens Advice also inspected the websites of a number of retailers offering sales on a BNPL basis. It says that none of these sites prominently highlighted the possibility that a customer could be subject to debt collection action, and adds that where this was mentioned, it was usually only referred to in a Terms and Conditions document.

Only one in nine of the retailers assessed by Citizens Advice gave a prominent warning to their customers that they would be entering into a credit agreement were they to purchase on a BNPL basis.

96% of those who reported being contacted by debt collectors said that it had led to them suffering one or more adverse consequences, such as: sleepless nights; ignoring texts, emails and letters in case they were about debts; avoiding answering the door; borrowing further money to repay the debt; or a deterioration in mental health.

In total, according to Citizens Advice, UK users of BNPL have paid £39 million in late payment fees over the past 12 months.

The Citizens Advice press release highlights the case of Liz (not her real name) who was totally unaware that she had made a purchase via BNPL at the time she started receiving calls from debt collectors.

The Government has announced that it intends to bring BNPL arrangements under Financial Conduct Authority regulation, following recommendations made in the Woolard review of the unsecured credit market. However, so far, no date has been set for this transfer of regulation. However, this survey highlights some of the issues that the FCA will need to tackle when it eventually becomes the sector’s regulator, and also highlights the issues that applicant firms will need to address, given that ensuring customers are treated fairly is one of the FCA’s principal objectives.

Citizens Advice says it wants the Government to ensure that BNPL is regulated “urgently”.

Millie Harris, a Debt Adviser at Citizens Advice East Devon, said: 

“My concern is that people aren’t processing the fact that Buy Now Pay Later is credit. They don’t realise there are going to be consequences if they don’t pay – it gives them a false sense of security.

“I’ve seen people using it for their kids’ clothes and shoes that they would otherwise never be able to afford. They are taking out what is effectively a loan, but they don’t see it as one. For example, I helped someone who has tens of thousands of pounds of debt, but they don’t see Buy Now Pay Later as part of that total. It’s almost under-the-radar debt.”

Dame Clare Moriarty, Chief Executive of Citizens Advice, said: 

“The sheer number of shoppers facing debt collection is startling. We know from our frontline advisers just how much stress this can cause.

“A seamless Buy Now Pay Later checkout process should not mean shoppers have to dig around in the small print to find out they’re taking out a credit agreement and could be referred to debt collectors if they can’t pay. The warnings should be unmissable.

“The Buy Now Pay Later industry has exploded, and we need consumer protection to keep up with the changes in the way we live. We hope the Treasury can keep pace.”