British consumers have taken over £4 billion in loans using Buy Now Pay Later (BNPL) services, according to a new study.
Eight million BNPL customers in the UK have outstanding balances averaging £538 each (totaling £4.14 billion). The debt bubble is expected to expand further this Christmas as 31 per cent of people plan to use BNPL services to make their purchases, found a study by smart money platform Credit Karma.
Despite concern among industry experts and the government, BNPL continues to grow, with research indicating that providers will acquire 1.6 million customers in 2021, with a total of 11.6 million active UK customers.
Consumer organization, which one? Said that customers are being “bombarded” with BNPL plans by the largest retailers and are often given no information or warnings about late fees or the risk of being in debt.
“It is very worrying to see such a huge amount of debt related to these schemes,” said Gareth Shaw, head of wealth in What? said. “This demonstrates why plans for BNPL regulation should not be further delayed, which should include greater marketing transparency, awareness of the risks of missed payments, and credit checks before consumers are approved to use BNPL providers. needed.”
Credit Karma’s report revealed that nearly half of BNPL customers (45 per cent) admitted to being late in payments, of which nearly a third were late in payments, resulting in a drop in their credit scores, while A similar number believe they have been rejected for it. A mortgage after missing repayment.
As of early October this year, research by Credit Karma shows Britons had spent £5.79 billion through the BNPL, of which £4.12 billion is yet to be paid.
Pay later providers like Clearna and Clearpay are common at online checkout for major retailers such as JD Sports, ASOS and Boohoo.
Klarna refuted the findings of Credit Karma’s study. A spokesman for the group said: “Our average balance is £48 and we restrict the use of our services to prevent debt creation if a payment is missed.”
The Treasury announced earlier this month that it would consult on regulation of the BNPL. Advice and information charity Citizen Advice said the BNPL is “like quicksand – it’s easy to slip in and very hard to get out.”
“Split payments are offered at checkout as a temptation, but the consequences can be disastrous for those who are least able to deal with them,” said Matthew Upton, policy director at Citizen Advice. “More than half of the youth who used BNPL in the last year struggled to make payments. The BNPL sector has grown incredibly fast and we need consumer protection to keep up with the momentum.”
Ziad El Baba, general manager of Credit Karma, said: “Buy now, pay later services can be a great tool for those who want to make purchases and split their payments into smaller, more manageable amounts.”
Credit: www.independent.co.uk /