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According to a recent survey for an education charity, the Center for Financial Capability, nearly a quarter of British citizens who opted to use the buy now, pay later (BNPL) services ended up being charged late payment fees.
The results of the survey
BNPL has become a very popular way to pay for goods and services over the last several years, especially when it comes to the UK. According to some estimates, about a third of the country’s adults have used BNPL at some point, and the survey reported that around 40% of participants between 18 and 34 years of age have admitted to using it.
The survey also points out that the increase in the cost of living and rising inflation are the most likely reasons why people tend to opt for this way of making payments. In addition, around 17% have used, or planned to use BNPL to handle their holiday purchases.
The charity also pointed out that BNPL is typically interest-free but also that users still tend to risk being charged late fees or suffering a negative impact on their credit score. In fact, about a quarter of the country’s BNPL users have already missed one or more repayments over the course of the last six months.
Among the previously mentioned 18- to 34-year-olds, about 34% of BNPL users have failed to make their payments on time. The survey revealed that two-thirds of those who missed repayments had done it twice, or sometimes even more. Another quarter of those who missed making their repayments in time have suffered a drop in their credit score as a result and have been contacted by debt collection agencies.
The cost of living crisis is pushing people toward BNPL schemes
Commenting on the results of the survey, the Center said that the sector is currently heavily unregulated, which is why providers of BNPL services are seemingly failing to run background checks and make affordability assessments on their customers. They simply start with the assumption that everyone will respect their obligations, which has led to the current outcome.
The lack of checks has allowed users to delve deeper into debt, and rack up multiple bills from separate late payments to various schemes that they decided to participate in.
The Center for Financial Capability’s trustee, Jane Goodland, stated that the figures revealed by the survey have highlighted the ongoing prevalence of BNPL services, as well as the dangerous financial risk that comes from using them. The on-going cost of living crisis is impacting the public, which is why many have opted to participate in these schemes in order to ease their situation.
However, they also did it without understanding the risks, or potentially their obligations. Goodland added that: “Most worryingly, our findings released today have revealed the significant number of those using the schemes who have fallen victim to late payment fees, poor credit scores and even contact by a debt collection agency.”
