Global: Late Fees Impact Nearly a Quarter of UK BNPL Users, Warns Survey

A recent survey conducted for the Centre for Financial Capability, an education charity, reveals that almost 25% of individuals in the UK who have utilized buy now, pay later (BNPL) services have incurred late payment fees.

The popularity of BNPL services has surged in recent years, with approximately one-third of UK adults having used such services, escalating to 40% among those aged 18-34, according to the charity’s findings. The survey also highlights that 25% of BNPL users, or those intending to use these services, attribute their choice to the current surge in the cost of living and inflation. Additionally, 17% of respondents have used or plan to use BNPL options to manage extra costs during the Christmas season.

While BNPL services generally offer interest-free terms, the Centre for Financial Capability cautions that users still face potential late fees and negative impacts on their credit scores. The survey reveals that roughly 25% of BNPL users have missed one or more repayments in the last six months, a figure that rises to 34% among individuals aged 18-34.

Among those who missed repayments in the last six months, approximately two-thirds have done so twice or more. Over 25% of these individuals experienced a decrease in their credit scores, and some were even contacted by debt collection agencies.

The Centre underscores the lack of regulation in the sector, emphasizing that BNPL providers are not obligated to conduct background and affordability assessments on users. This regulatory gap allows users to accumulate multiple bills from separate late payments, potentially leading to increased debt.

The report specifically mentions Clearpay, which charges 25% of the original purchase price, demanding a one-time payment. Failure to meet this payment results in the involvement of a debt collection agency for recovery.

Jane Goodland, trustee of The Centre for Financial Capability, expresses concern about the findings, stating, “These figures reveal the ongoing prevalence of Buy Now, Pay Later schemes and the dangerous financial risks that users face in this wild west unregulated market.” She emphasizes the need for users to fully comprehend the associated risks, especially as the cost-of-living crisis continues to impact the public.