Column: 'How buy now, pay later plans can lead to spiral into debt'

HOW much does it really cost when we “buy now, pay later”.

It’s tempting, isn’t it? Get what you need or want now, but pay later.

Recently, there has been a growth in such offers with options to buy now pay later (BNPL) often appearing at checkouts on retailers’ websites.

It’s an option that the retailers are pushing hard.

Many of us will have said “Why not?” when given the option, and we wouldn’t be alone.

An estimated 14 million people have used BNPL in the last 12 months.

And it can be a good option for some of us when we’re making a “considered” purchase, helping spread the cost of those more expensive items, interest-free and avoiding expensive credit, providing we can afford repayments and know what we’re getting into.

The trouble is that, based on the experience of Citizens Advice and the findings from our latest research, that’s not the way many people are doing things.

For example, our research shows BNPL shoppers were charged £39million in late fees in the past year.

Our research also shows that one in 10 Buy Now Pay Later shoppers have been chased by debt collectors, rising to one in eight young people.

Of those who were referred to a debt collector for missed payments, 96 per cent experienced a negative consequence.

They reported at least one of the following: sleepless nights, ignoring texts, emails and letters in case they were about debts, avoiding answering the door; borrowing money to repay the debt or their mental health getting worse.

We fear that of the millions of shoppers in the UK using BNPL to split or delay payments, many could be at risk of starting the slide down the slippery slope into problem debt.

Yet, when we checked, we found that not one of the BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments.

Instead, this was only flagged in the terms and conditions on a separate page, if at all.

Our researchers also found that out of those offering BNPL, only 11 per cent warned shoppers they were taking out a credit agreement; the remaining 89 per cent put this information in the small print or terms and conditions.

So enticing is the offer, and so poor the level of consumer awareness that, as our research shows, 41 per cent of people using BNPL have struggled to make payments and 26 per cent have regretted taking out their agreements in the first place.

We asked the BNPL firms featured in the research if they ever referred customers to debt collectors. Klarna, Clearpay, Laybuy and Openpay confirmed they do this as a last resort. Splitit said it doesn’t. PayPal refused to comment. Currently, the market, which these big players and others dominate, is unregulated. As a national body, we think there is an urgent need for the Treasury to address this.

Without proper protections, shoppers have been left unprotected and ill-informed during the sector’s rapid expansion, and the consequences are there to see.

We think that a seamless BNPL checkout process shouldn’t mean shoppers having 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.

Instead, the warnings should be unmissable.

If you’ve got problem debts caused or made worse by BNPL schemes, it’s essential to get advice.

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Visit www.citizensadvice.org.uk/debt-and-money.

Citizens Advice provides debt advice, and you can start by using the national website, there’s even a webchat option.

But, whatever you do, don’t bury your head in the sand and seek out free, independent debt advice.