Britons will owe billions of pounds in the new year after using buy now, pay later (BNPL) to fund Christmas.
Analysts estimate that shoppers will spend almost £4billion with BNPL lenders over the festive season, which would be 8.8 per cent more than last year.
It will take the total amount spent in 2023 to £17billion, up more than a quarter compared to 2022.
Amid fears that this will lead to a painful debt hangover in January, campaigners say shoppers ‘need to think hard before using BNPL’.
Pressure is mounting on ministers to speed up new rules for the industry, three years after plans to regulate were first announced.
Christmas costs: Analysts estimate that shoppers will spend almost £4bn with buy now pay later lenders over the festive season, 8.8% more than last year
BNPL allows consumers to shop with an agreement to pay within a certain period or in instalments.
Providers have claimed that it offers consumers choice and is a responsible form of lending.
But critics argue the unregulated industry can trap people in a spiral of debt as affordability checks are not tough enough.
Helen Ganney, from the debt charity Christians Against Poverty, said Christmas can be a ‘really stressful, anxious time’ for hard-up households.
She said: ‘Buy now, pay later can seem an attractive way to afford all the things we’d like to buy at Christmas – but the “later” part comes around quickly and will need to be paid back.
It is worrying that these products are not currently regulated by the Financial Conduct Authority, as other lenders are.’
According to the latest research from Adobe Analytics, consumers are set to spend £3.7billion via firms like Klarna, Laybuy and Clearpay over the festive period.
That will take the total to £17.2billion across 2023 – up 26 per cent on last year.
Debt advice organisation Money Wellness said clients were regularly asking for help with 20 or more BNPL bills.
‘The pressure to get the best presents, cook a huge meal or throw the perfect party is real,’ said Money Wellness external relations boss Sebrina McCullough.
‘But shoppers need to think hard before using BNPL about whether they can afford to make the repayments in the new year.
We’re certainly gearing up to see a rise in the number of people seeking free debt help in January and February as a result of BNPL spending this Christmas.’
Debt charity Step Change, which said January will be its busiest period, warned households will feel the pinch this year ‘as the cost-of-living crisis bites’.
Spokesman Richard Lane said advertising ‘implies a happy Christmas involves spending money’ but added: ‘Your loved ones wouldn’t want you to suffer financially after the festive is over.’
Ministers promised to regulate the industry in 2021 and published draft legislation earlier this year.
The new rules, including tougher advertising restrictions and stronger rights for consumers, have yet to be introduced.