One in 10 shoppers who use buy now pay later have been chased by debt collectors, according to Citizens Advice.
In February the Treasury said services would become a regulated activity policed by the Financial Conduct Authority.
Regulators have been urged to crack down on ‘buy now, pay later’ firms after a damning report revealed that one in 10 shoppers using the credit services are being chased by debt collectors amid surging demand for this form of credit.
Research from Citizens Advice also found that 12 per cent of 18 to 34-year-old customers using the service had received contact from or been referred to debt collectors.
These options often appear at checkouts on retailers’ websites and help spread the cost of purchases, interest-free, potentially avoiding expensive credit.
Klarna, the biggest such provider in Britain with 15 million customers, was valued at $45.6 billion in a fundraising in June.
Other providers include PayPal, Clearpay, Laybuy and Openpay and under the arrangement, shoppers online and now increasingly in stores are being given the option to defer paying in full and instead agree to pay, say, in three monthly instalments.
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 alone.
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 and of those who were referred to a debt collector for missed payments, 96 per cent said they had experienced a negative consequence.