One in 10 (10%) shoppers who use buy now pay later have been chased by debt collectors, according to Citizens Advice.
Around one in eight (12% ) 18 to 34-year-old customers using the service had received contact from or been referred to debt collectors, the charity’s research also found.
These options often appear at checkouts on retailers’ websites. They can help spread the cost of purchases, interest-free, potentially avoiding expensive credit.
However, there have been concerns that some people end up spending more than intended and slide into debt that they cannot comfortably pay back.
The Government announced in February that interest-free buy now pay later credit agreements will be regulated by the Financial Conduct Authority (FCA).
Citizens Advice estimates from its latest research that shoppers using these agreements across the UK were collectively charged £39 million in late fees in the past year.
It commissioned a survey of more than 2,000 adults across the UK in July, who had used the service in the previous 12 months.
Of those who were referred to a debt collector for missed payments, 96% said they had experienced a negative consequence.
Negative experiences included sleepless nights, ignoring texts, emails and letters in case they were about debts, avoiding answering the door, borrowing money to repay the debt, or deteriorating mental health.
The charity raised concerns about shoppers being “ill-informed”, with customers being left to dig around in the “small print” or terms and conditions to find out credit agreement information.
Citizens Advice asked BNPL firms if they ever referred customers to debt collectors. Klarna, Clearpay, Laybuy and Openpay confirmed they do this as a last resort, the charity said.
It emphasised that debt collectors do not have the same powers as bailiffs.
The charity said debt collectors do not typically visit someone’s home, although this occasionally does happen, and they do not have rights to take belongings.
A buy now pay later debt cannot be passed to bailiffs unless there is an unpaid court judgment, it added.
Citizens Advice said that a woman aged in her 60s was trying to buy plants online, but struggled to find the postage cost at the checkout and decided to abandon her purchase.
The keen gardener was surprised to receive an email saying she had signed up to a buy now pay later agreement, and tried to cancel her order.
She told Citizens Advice: “I really don’t understand how I ended up paying for my plants through buy now, pay later.
“I didn’t understand what it was. Then I get these threatening emails saying they’re going to contact debt collectors, and then I got a letter from a debt collector.
“I couldn’t sleep, I lay awake worrying that someone was going to turn up to my house and start taking things. I have a number of health issues and I was worried this was going to make me ill again. It was eventually resolved, but at great stress to me.”
Millie Harris, a debt adviser at Citizens Advice East Devon, said: “My concern is that people aren’t processing the fact that buy now pay later is credit. They don’t realise there are going to be consequences if they don’t pay – it gives them a false sense of security.
“I’ve seen people using it for their kids’ clothes and shoes that they would otherwise never be able to afford. They are taking out what is effectively a loan, but they don’t see it as one.
“For example, I helped someone who has tens of thousands of pounds of debt, but they don’t see buy now pay later as part of that total.
“It’s almost under-the-radar debt.”
Dame Clare Moriarty, chief executive of Citizens Advice, said: “A seamless buy now pay later checkout process should not mean shoppers have to dig around in the small print to find out they’re taking out a credit agreement, and could be referred to debt collectors if they can’t pay. The warnings should be unmissable.”
Citizens Advice is urging anyone who has been contacted by debt collectors to get free, independent debt advice.
Georgina Whalley from Openpay said: “Openpay doesn’t use enforcement agents, bailiffs or any other form of in-person debt collection service.
“We do refer some outstanding arrears to a third party, but Openpay customers are only contacted via SMS, email and post – never in person.”
Clearpay said: “As a last resort, we sometimes pass information to a debt collection agency.
“However these are regulated by the FCA (Financial Conduct Authority), and work within the guidance and frameworks of treating customers fairly.”
Laybuy said: “Laybuy only refers a customer to a debt collector as a last resort, and only after other attempts to collect the outstanding payment have been exhausted.
“When a debt is referred to a debt collector, we only ever refer outstanding purchase price of the product. Late fees, which are limited to a maximum of £24 for a single order, are never passed to a debt collector. Laybuy also pays all the cost for debt collection.”
Alex Marsh, head of Klarna UK, said: “At Klarna we only ever use debt collection agencies to help us contact customers we are unable to reach and we do this on fewer than 1% of orders.
“The debt collection agencies we work with are all FCA authorised and will only contact customers by telephone or email and do not use bailiffs.
“We encourage any of our customers whose circumstances have changed, to please get in touch so we can help you with a plan to get back on track.”