Quarter of UK BNPL users charged late fees

The use of BNPL has soared in recent years: a third of UK adults have now used the services, rising to 40% of 18-34-year-olds, according to the charity's survey. A quarter of those who used or intend to use BNPL services do so because of the current increase in the cost of living and inflation, while 17% have used or intend to use them to pay for additional costs at Christmas.

The charity warns that, while BNPL is generally interest free, users still risk late fees and hits on their credit scores. Around a quarter of those who have used BNPL have missed one or more repayments in the last six months, rising to 34% of 18-34-year-olds.

Of those who have missed repayments in the last six months, around two thirds have missed payments twice or more. Over a quarter of those who missed repayments had a decreased credit score as a result, or had been contacted by a debt collection agency.

The Centre says that because the sector is currently unregulated there is no duty for the providers to run background and affordability assessment checks on the users. This allows people to get into further debt, as they could rack up multiple bills from separate late payments to the schemes.

Clearpay, it notes, charges 25% of the original purchase price, which is required to be paid at once and if this is missed, it will use a debt collection agency to recover amounts.

Jane Goodland, trustee of The Centre for Financial Capability, says: "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. As the ongoing cost-of-living crisis continues to impact the British public, it is apparent that many users are increasingly reliant on these schemes, without fully understanding the risks involved.

"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."