Support for the people of Medway

3 years ago the Woolard Review was published calling for urgent regulation of Buy Now Pay Later (BNPL) products. At that time around 11% of adults had used BNPL.

Since then BNPL has gone mainstream. In November 2023, we found that these products were being used by more than 1 in 3 UK adults (37%). And in the first quarter of this year more than £1 in every £7 spent online was through a BNPL product.

But 3 years on from the Woolard Review, BNPL remains unregulated, leaving millions of people going without basic protections when using these products.

Problems on the rise

As the use of BNPL products has grown, we’ve seen a surge in the number of people coming to Citizens Advice for help with a BNPL issue. In May 2024, we helped over 500 people with this. This is almost twice as many people as we helped this time last year, and almost seven times as many as we helped with this issue when the Woolard Review was first published calling for regulation of the sector.

Number of people we have helped with a Buy Now Pay Later issue each month.

While the number of people needing support is on the rise, our advisers face unique challenges when supporting people with these unregulated products. Time and time again we find that the lack of regulation in this market is leaving customers with problems that are going unresolved — with no one to escalate problems to if they can’t get the support they need from their lender.

A lack of regulation is leaving people out of pocket

When using a credit card, borrowers can rely on Section 75 protection. This protects purchases over £100 so people can get their money back if a product is defective or doesn’t arrive. Proposals for regulation have recommended extending Section 75 protection to BNPL products, but it currently doesn’t apply to these products.

This is leaving people like Abi out of pocket through no fault of their own.

Abi has a low income, and opted to use BNPL to purchase an item she couldn’t otherwise afford. But the product never arrived.

Abi contacted her lender to let them know about the problem, but never got a response. She came to Citizens Advice for help when she was contacted by the BNPL provider to say her debt was being passed to a debt collection agency. She wanted help as the lender hadn’t responded when she told them she’d never received the product. She felt they should be chasing the company for the debt rather than her.

The absence of regulation leaves borrowers with no back up when something goes wrong

Abi’s problem wasn’t just limited to the money she’d lost. She also faced a wall of silence from her lender when she contacted them for help, which left her unable to resolve her problem. This left her facing considerable stress, especially when the debt was passed to a debt collection company.

In instances like these, the absence of regulation leaves people at the mercy of their provider. In contrast, if the product was regulated the firm would have been required to respond to Abi’s complaint in a timely manner. If it fell short of this — or if Abi was unhappy with the outcome — she would be able to go to the Financial Ombudsman for help.

Without this protection, consumers can’t escalate their complaint to an impartial adjudicator for help when something goes wrong.

People who need debt support are being failed by a lack of clear standards for support

When consumer credit is regulated, there are clear rules on how debt is collected, to make sure people get the right support and aren’t pushed further into crisis. But again, without regulation — we’re finding there’s a vacuum where there should be protections.

This really matters for the people we help. In fact, 4 in 5 (80%) of the people who come to us for help with a BNPL issue need help dealing with their debt repayments. But a lack of clear and consistent standards for debt support in this unregulated sector is leaving them without appropriate support.

Ian came to us for help when he was unable to keep up with the repayments to his BNPL lender.

He contacted the provider several times to ask if he could put a repayment plan in place, so he could pay the debt at a more manageable rate. Each time Ian was told he would be contacted by a manager who could help him. But 2 months later he still hadn’t heard from anyone. During this time he‘d received more communications demanding payment. This was causing a large amount of stress, and the lack of response was making it impossible for him to resolve the situation.

Without regulation there’s very little that can be done to support someone who is being ignored by their provider. If BNPL was regulated our advisers would be able to refer back to standards set by the regulator, and if the firm didn’t comply they’d be able to escalate this to the Financial Ombudsman Service. But until this regulatory loophole is closed there’s no organisation with authority to oversee BNPL providers, who can step in if consumers do not get adequate protection or support.

The next government must close this gap in consumer protection

Every day these gaps in protections are resulting in real harms for consumers — from lost money, to the stress caused by being chased for payments when you can’t get the support you need.

With £1 in £7 spent online through one of these unregulated products, it’s vital that the next government regulates this sector and closes the gap in consumer protection.

*All names have been changed.

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