Serious concerns over ‘Buy Now Pay Later’ credit during lockdown

Are you keeping track of your debt in difficult times? Our research suggests more 18-24 year-olds are looking to delay payments amid the pandemic…

Tom Harrison
Content writer
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Posted 20 MAY 2020

Young shoppers are increasingly turning to ‘Buy Now Pay Later’ (BNPL) credit schemes to spread the cost of purchases during lockdown.

Almost a quarter (23%) of 18-24-year-olds told they’re likely to use non-traditional forms of credit to keep them afloat – but the ethicality of these in the wake of the COVID-19 outbreak has been called into question.

Nearly a fifth (18%) of UK shoppers have noticed more BNPL plans being offered to them since social distancing restrictions took hold – a proportion which shoots up to 33% among ‘Generation Z’.

And John Crossley, Head of Money at warns there are “serious concerns” over some people’s ability to keep track of their debt and prevent bills from racking up.

Buy Now Pay Later

BNPL schemes, through which shoppers are encouraged to delay or spread the cost of a purchase, have become a commonly used payment method. research suggests 20% of UK adults – up to 10 million people – took advantage of BNPL during 2019, with over a third making it their chosen outlet of credit.

The Financial Conduct Authority (FCA) recently announced a three-month payment freeze for those struggling to make credit repayments, including BNPL, in the wake of the pandemic. But concerns still remain.

Pre-lockdown, research showed how 45% of BNPL users had missed at least one payment in the last year – with 48% incurring additional fees and 56% claiming a missed BNPL payment resulted in them being unable to pay back other debt, such as on a credit card, loan or overdraft.

Following a missed payment, over half (55%) say they’re reluctant to use such a BNPL scheme again.

‘Inappropriate’ to advertise

It appears the promise of being able to hold off on payment until a later date is proving a stronger draw for younger people in the UK. Although just 16% of Gen Zers have used BNPL since lockdown, a huge 64% admit they spent more than they normally would when paying with BNPL.

In the wider adult population only 7% have made a BNPL buy since 23 March – with over half (54%) saying they’d never use one, and two-fifths (40%) suggesting it’s inappropriate for retailers to advertise such schemes at a time when households are cautious about taking on more debt.

Credit score damage

Aside from mounting late or missed payments charges, BNPL initiatives have the potential to damage the credit scores of the millions using them. Our research suggests over two-fifths (41%) of consumers are unaware the ‘default’ of a missed payment appears as a black mark on their scores – potentially hampering their ability to borrow in future.

John Crossley said: “Keeping control of household finances will likely be front of mind for many people during this difficult time. Our research suggests that young people in particular may be turning to alternative credit schemes at a time of growing economic uncertainty.

“The latest payment freeze announced by the FCA on Buy Now Pay Later purchases is welcome news for those struggling with keeping on top of current payments. Fees and interest terms differ between BNPL providers, but customers should be aware that interest on purchases will still accumulate during the payment freeze and will be payable after the three-month break.

“If you are struggling financially there are dedicated services to provide help, including money management services and debt charities which offer free confidential advice.”