Consumers are borrowing to pay off BNPL debt

Its findings showed the most popular type of borrowing to repay BNPL debts was via credit cards, at 26%.

Other forms of borrowing included via overdrafts, borrowing from friends and family, loans and payday loans.

The charity further found younger shoppers as most likely to borrow to pay off BNPL purchases, with 51% of 18-34 year-olds borrowing to meet payments. That compared with 39% of 35-54 year-olds, and 24% of over-55s. 

The BNPL sector remains unregulated, whilst the market continues to grow. 

The UK’s leading BNPL provider, Klarna UK, began reporting data to TransUnion and Experian from 1 June 2022, in a move that has been interpreted as an anticipation of tighter regulation. 

The government has said BNPL is to be regulated by the Financial Conduct Authority (FCA), though this is unlikely to happen until later this year or in 2023. 

CA wants this regulation to including affordability checks by all participating firms, and clearer information at online checkouts.

Millie Harris, a debt adviser at CA East Devon, said: “Most of the people I speak to who are using Buy Now Pay Later live off overdrafts and credit cards, so are using these for repayments. It’s just relying on one debt to pay off another debt. 

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

Dame Clare Moriarty, chief executive of CA, said: “Shoppers are piling borrowing on top of borrowing, and sinking into ever more desperate situations that can feel impossible to escape from. 

“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. Buy Now Pay Later is part of the credit industry and must urgently be regulated as such.”