Citizens Advice, a charity, estimates that one in 12 Britons used buy-now-pay-later loans to buy essential goods such as food and toiletries in the second half of 2021
Save time by listening to our audio articles as you multitaskAudrey is far from alone. Fintech startups have spent recent years reviving point-of-sale lending, now dubbedto British consumers in 2016 and now counts nearly a third of the adult population as customers. Citizens Advice estimates that one in 12 Britons usedThe evidence thatitself causes financial distress is limited. But it can encourage people to spend more than they otherwise might.
That was before the cost of living started to rise in earnest. The energy price cap, which limits suppliers’ default tariffs, rose by 12% last October. On April 1st it jumped by a whopping 54%. It could spike again by a similar amount in the autumn. Food-price inflation is also rising. In the last six months of 2021 food prices were 1.5% higher than for the same period the previous year. Over the next two months, they rose by a further 3.7%.
It is all going to add up, predicts the Office for Budget Responsibility, to the biggest drop in real household disposable incomes in any tax year since records began in 1956. Running down savings, scrimping more and wearing extra jumpers can all help. But taking out credit is another way to cover the bills. Sure enough, net credit-card borrowing in February was £1.5bn—higher in real terms than in any month since March 2004 .
Straitened times have a habit of encouraging unsustainable borrowing. The years that followed the financial crisis of 2007-09 saw a boom in payday lending, with firms selling high-cost loans to people who couldn’t pay them back. In 2014 the Financial Conduct Authority took over regulation of consumer credit. Four years later Wonga, then Britain’s biggest payday lender, collapsed into administration amid plummeting sales and a surge in compensation claims for mis-selling.
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