Almost seven million young people still unaware BNPL can lead to debt, despite being its biggest users

 

• Nearly half (46%) of young people (those aged 18-34) don’t know they can get into debt using buy now, pay later (BNPL) products.

• Despite almost four in ten (36%) young people using BNPL at least once a month, just a fifth know that these products remain unregulated. 
• 46% are also unaware that BNPL lenders can add fees for missed payments.

28 March 2024: 6.7 million young people (aged 18-34) across the UK don’t know that using buy now, pay later (BNPL) can lead to debt, research from responsible lender, Creditspring* reveals.

Nearly half (46%) of young people remain unaware BNPL can lead to debt, much higher than the 35% UK average. These findings mark the launch of Creditspring’s fourth Financial Stability Tracker which examines the UK’s financial position and concerns. 

BNPL is the second most common form of borrowing after credit cards amongst young people in the UK, with 15% people using BNPL since August 2023 compared to a fifth (19%) using credit cards. 

Despite almost four in ten (36%) young people using BNPL at least once a month, just a fifth know that these products remain unregulated. The lack of understanding about the risks of BNPL among young people is even more concerning given they are the most regular users of these products. 

Almost half (46%) of young people are also unaware that BNPL lenders can add fees for missed payments, with the same proportion (46%) unaware they could also be referred to a debt collector. Research from the Centre for Financial Capability shows that nearly a quarter of Brits that have used BNPL have been charged late payment fees.

A third (32%) of young people don’t realise that BNPL is a form of borrowing, similar to a credit card, whilst nine in ten (88%) don’t know that they can’t complain to the Financial Ombudsman about an issue with BNPL as it remains unregulated. 

Young people are also struggling to repay their BNPL debts – less than four in ten (37%) 18-34 year olds are able to repay without issue compared to 60% of 35-54 year olds.

StepChange research has also revealed a concerning correlation between use of BNPL and financial difficulty. Its recent polling showed that those with BNPL debt are three times more likely to be in problem debt (23%) than UK adults (8%).

Neil Kadagathur, CEO and Co-Founder of Creditspring, comments: “The UK is sitting on a ticking BNPL timebomb – millions of young people are unknowingly putting their financial future at risk by piling up BNPL debt.

“There is a huge knowledge gap when it comes to BNPL – this is driven by lenders who continue to offer a lack of transparency, confusing repayment terms and hidden costs. BNPL lenders need to step up and take responsibility for tackling the misconceptions that still exist about the risks of using these products. 

“Regulation of BNPL is absolutely essential, and can’t come soon enough. Plans to bring the BNPL market to heel have been delayed for far too long, which has led to increased confusion and ultimately punished borrowers. The regulator needs to push through this much-needed legislation as a priority.”

Simon Trevethick, Head of Communications at StepChange Debt Charity, said: “Our research reveals a worrying crossover between use of BNPL and financial hardship, but also that BNPL use is becoming much more common. With living costs stretching household budgets, there’s a concern that people are relying on credit like BNPL to make ends meet, which presents as more of a risk as it’s not regulated in the same way as other types of consumer credit.  

“With BNPL remaining unregulated, there’s a lack of consistency across the sector, meaning affordability checks can be patchy, as can consumer understanding. Younger people who may have less financial experience can be more vulnerable to falling into problem debt after using BNPL – especially as at checkouts it’s not always clear that BNPL is a form of borrowing. Regulating the industry is long overdue and we urge the government to follow through on its commitment to do so as soon as possible.”

Creditspring provides a new way to access credit safely. FCA-regulated, it is a credit subscription service that responsibly offers short-term, affordable 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.