Half of UK Buy Now, Pay Later Users Unaware of Late Fee Risks

In recent years, the popularity of Buy Now Pay Later (BNPL) services has surged, particularly among UK consumers. A study conducted by Citizens Advice revealed that over 15 million adults in the UK plan to utilize BNPL options to manage their festive spending this year.

Understanding BNPL Usage and Awareness

New research from RFI Global, commissioned by the non-statutory regulator the LSB, highlights some concerning statistics regarding consumer awareness of BNPL services:

• Only 52% of BNPL users are aware of potential late payment fees.
• A mere 50% have an understanding of how much these fees may cost them before they incur them.

Impact of Late Fees on Consumers

The findings indicate that:

• About 15% of BNPL users have faced late fees.
• This percentage increases to 22% among individuals with ‘poor’ or ‘very poor’ credit scores.

Additionally, the research shows that just over one-third of BNPL users make their decision to use these products at the check-out stage, with around three-fifths unaware that BNPL services are currently unregulated.

Upcoming BNPL Regulations in the UK

In response to these concerns, the UK Government announced plans for BNPL regulation that will bring these services under the supervision of the Financial Conduct Authority (FCA) and subject them to the Consumer Credit Act. However, the LSB notes that these regulations are not expected to be implemented until at least 2026.

Expert Insights on BNPL Regulation

Emma Lovells, the chief executive of the LSB, expressed her support for the upcoming regulations, stating:

“The Government’s announcement on BNPL regulation was very welcome, but in the period before regulation comes in, lenders can’t rest on their laurels. More awareness of products and what is required from customers is needed, along with proactive outreach, especially for those experiencing financial difficulty.”

As the BNPL landscape continues to evolve, consumers are urged to educate themselves about the risks and responsibilities associated with these financial products. For more information on managing your finances, visit Money Advice Service.