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Report: 40% of BNPL users borrowing money to pay debts

Alongside Zopa and Apple launching new BNPL products this week comes renewed calls for regulation.

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As two new ‘buy now, pay later’ (BNPL) products launch this week, Citizens Advice has revealed more than 40 per cent of BNPL customers have to borrow money to pay off what they owe.

The charity said that the ease of BNPL means people often do not realise how serious it is, coming to rely on it more quickly than other credit, without realising the potential consequences.

In a still unregulated market, customers are not protected, and Citizens Advice is calling for BNPL to be “urgently regulated” given its position in the credit industry.

“Shoppers are piling borrowing on top of borrowing, and sinking into ever more desperate situations that can feel impossible to escape from,” Citizens Advice CEO Dame Clare Moriarty said.

“The spiral of debt from Buy Now Pay Later to credit cards, loans and even payday lenders shows it’s not a risk-free alternative.”

According to the report, the types of borrowing to pay off BNPL debt include loans,  overdrafts and borrowing money from friends and family, with 26 per cent of people turning to credit cards.

While young shoppers were the most likely to borrow to pay off BNPL (51 per cent of 18-34 year-olds), a significant number of 35-54 year-olds do as well (39 per cent) and almost a quarter of those over 55 (24 per cent).

“It’s heartbreaking to see parents who can’t afford their children’s clothes or shoes, turning to Buy Now Pay Later, thinking it’s doing them a favour,” Citizens Advice debt adviser Millie Harris said.

“In reality, it’s just more debt and more creditors, on top of what they’re already facing.”

The charity revealed in March that one in 12 people used BNPL to cover basic costs, such as food and toiletries, in the last six months.

Those in debt, claiming universal credit and young people were at least twice as likely to have used BNPL for essentials than the general population.

Apple shared its big move into the BNPL space with its announcement of Apple Pay Later this week, putting BNPL into the hands of nearly half of the UK.

Digital bank Zopa also entered the growing sector with what it is describing as a “new era of BNPL 2.0”, a regulated BNPL.

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