16 million people in the UK are still unaware you can get into debt using ‘Buy Now Pay Later’ (BNPL) services*, according to research from responsible lender, Creditspring. 

A third of people (31%) still don’t think that BNPL purchases can lead to debt, however, this jumps to over half (51%) for those aged 18-24 who are 29% more likely to use BNPL than then UK average.  

Almost one in three (29%) of people remain unaware that BNPL is a form of borrowing, similar to a credit card. Again, this is significantly higher for younger people, with four in ten (39%) 18-24s not unaware of the risks.  

Awareness of the risks of BNPL remains low across the board: 

·        Half (50%) of younger people also did not know that BNPL providers can add extra costs or late fees if payments are missed – compared to a UK average of 41%.  

·        Nearly half (46%) of all people were still unaware that they could be referred to a debt collector for missing a BNPL payment. 

·        Just 44% of people using BNPL were able to repay loans without issue with one in ten (9%) admitting that it pushed them into debt. 

·        Just a quarter of BNPL users (23%) feel in complete control of their spending when using these products.  

With the FCA’s guidance on BNPL regulation still unpublished and reports that it may be put on hold, it remains unclear if and when legislation and implementation will come into force. In the meantime, Creditspring is calling for lenders to ensure they are protecting borrowers and lending responsibly, especially with Consumer Duty guidelines coming into force.  

Creditspring is also concerned that BNPL could have a disproportionate impact on more vulnerable users who are uncertain what their financial position will look like in a couple of months’ time. As a result, although they may be able to afford BNPL payments currently, they run the risk that they won’t be able to in future – putting them at risk of being hit with late fees.  

Neil Kadagathur, Co-Founder and CEO of Creditspring, comments: “Despite increasing usage, there is still a severe misunderstanding of how BNPL works. After around a year of rising costs, household finances have been stretched to breaking points – many are using BNPL as a crutch until payday without being fully aware of the risks of doing so. The onus has to be on lenders to ensure that borrowers understand the risks and support them before they rack up huge debt piles.  

“If used correctly, BNPL offers more flexibility to UK shoppers - however, the issue is often in the way they are offered or promoted with little information around the risks of missed payments or multiple BNPL purchases until it’s too late. 

“Regulation of this sector can’t come soon enough yet we’re unlikely to see it this year, meaning households will be at risk of BNPL debt throughout the expensive summer holidays and into – what is set to be – another challenging Autumn. Borrowers urgently need lenders to improve their communications so people understand what they are signing up to and the risks inherent with using credit products such as BNPL.” 

Creditspring is an FCA-regulated, credit subscription service offering affordable, responsible credit to borrowers. Members pay a fixed membership fee every month to allow them to access two no-interest loans per year with clear repayment terms, capped costs and no hidden charges, late fees or confusing interest rates.