According to the survey, the BNPL payment method has increased in popularity over the past year, in part because it enables users to avoid shelling out on goods in full and upfront. However, regulators and consumer groups have voiced concerns over the risk of indebtedness.
Research commissioned by the Centre for Financial Capability, a UK-based financial education charity, found that 22% of BNPL users have missed one or more repayments in the six months to December 2023. Of those people, more than one-quarter had lower credit scores because of debt collection agencies' collecting procedures. Young people were most likely to receive late fees, with 34% of users aged 18-34 charged for missing a repayment over the same period.
Although the overall number of BNPL users hit by late fees declined slightly year on year in 2023, the number of people aged 55 or over fined for missing a repayment increased from 7% to 10%. The charity organisations also found that 21% of users were unclear about what late repayment fees they would owe the company if they missed a repayment, as well as how this would affect their credit score.
The paper shows that one-quarter of all people who have used or intend to use BNPL did so or would do so because of inflation and rising living costs. BNPL, which is largely interest-free, is unregulated in the UK, meaning providers do not have to run affordability checks on prospective users. Consumer groups have complained that the current setup can lead people to gather more and more debt if they build up bills from various late repayment fees on products from different providers, even though the UK government first stated that it would regulate interest-free BNPL products in February 2021.
As per the Centre for Financial Capability's trustee official statement, the need to protect consumers from dangerous financial trends, including BNPL, was urgent and pressed stakeholders to educate users about the risks. Moreover, financial education should be coupled with government regulation on BNPL services, so it can ensure that people are protected.
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