Amid mounting bills and the skyrocketing cost of living, pensioner Audrey found herself without money to buy food.
She works a few hours a week to supplement her pension, but that left her with nothing for groceries. So she turned to Buy Now Pay Later (BNPL) to borrow £40.
She struggled to repay what she owed – but alongside pressure to pay to meet more charges, Audrey was also bombarded with messages from the company offering her higher amounts.
“It was either use BNPL or starve, so I used it,” she said. “I kind of knew I would have a hard time making the refunds, but I had no other way to get food. I bought canned food because it’s not perishable and would last me longer. long time.
“I struggled to repay the money. They constantly harass me, calling me for payments. It’s really stressful like if I can afford to repay right away, I will.
“This company is also texting and emailing me offering £100 and even £500 credit. It makes no sense because I can’t even pay back £40, how could I pay back £100 or even £500?”
Britons are on the verge of a debt crisis, with one in five admitting they will need to borrow money or use credit to help cover the cost of essentials.
In January this year, Britons owed £1,767.1billion in secured and unsecured debt, a staggering £62.2billion increase from the previous January.
Credit card debt hit an all-time high in February this year – Bank of England figures revealed credit card borrowing jumped by £1.5bn to £59.5bn pounds sterling – the highest since 1993 when the records started.
While a recent report from the Money Advice Trust found that a quarter of adults had to use credit to cover the cost of bills or food in the first three months of 2022 and one in five said they expects to have to use the credit to cover the cost of essentials over the next three months.
The charity found that between October 2021 and March 2022, one in 12 people used BNPL to cover basic costs such as food and toiletries.
CAB calls for urgent regulation of the service, to ensure the financial security of those who use it.
Dame Clare Moriarty, Managing Director of Citizens Advice, said: “The fact that people are turning to Buy Now Pay Later for their groceries really highlights the urgent need for industry regulation.
“As the cost of living soars, we fear that more people in dire straits will see this unregulated form of credit as the answer.
“The government needs to keep pace with these companies and make sure consumers are protected.”
Jane Tully, director of external affairs and partnerships, at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, told LADbible the helpline has received more calls than last year and that she “expects this trend to continue” over the next month due to greater pressure on already stretched budgets.
Tully told LADbible: “Over the past few years, the average amounts owed by people contacting us for debts such as energy, council tax and rent arrears have increased.
“We have also seen a change in the types of debts people are contacting us about. Energy arrears are now the most common type of debt we hear about. In the first three months of this year, one in three callers (32%) had energy debt, up from 22% in the same period of 2021.”
She continued: “Many people are already struggling to make ends meet, and with energy, food and fuel prices continuing to rise, the situation is set to get worse for many more. . Our concern is that as pressure on household budgets increases, millions of people will be pushed into financial hardship.
“Using credit to cover essential expenses, like bills, because you don’t have enough money coming in, is a really difficult situation. For example, if your income does not increase, the following month you still have to pay the bill, plus the loan repayment and any interest due.
“Debt can pile up quickly and have a significant impact on your financial and mental well-being.”
The Money Advice Trust has found that certain groups are more at risk of getting into debt, including those aged 18-34; people from an ethnic minority; and those on benefits.
And it’s not like those being pushed into debt don’t know what they’re up against – 15% said they thought they would need to seek advice about debt issues because of the rising cost of living – but for many with prices rising rapidly there is little choice.
Tully added: “A significant proportion of callers to National Debtline do not have enough money to cover household bills and we are already hearing of people having to make impossible choices trying to meet basic needs including rationing of food and heating.”
Although there is little we can do in the face of the cost of living crisis, if you are having difficulty with your finances there is help available – you can contact the National Debtline here or on the phone; or contact the Citizens Advice Bureau here.