UNITED KINGDOM: Desperate officers seek dodgy loans

Concerns have been raised on cash-strapped British officials turning to controversial Buy Now, Pay Later (BNPL) loans after being turned down by traditional lenders.

An analysis by the University of Edinburgh found that one in 10 public sector and National Health Service (NHS) staff who were initially rejected for a more conventional loan on the grounds that they could not afford to repay it, then obtained a credit from BNPL companies last year.

The researchers also found that the overall use of BNPL products among public sector employees had “significantly increased” compared to other credits and loans, and was beginning to supplant other non-traditional lenders such as those offering high interest payday loans.

Tina Harrison, from the University of Edinburgh Business School, warned that the growing use of BNPL – which is still unregulated in the UK – increases the risk of public sector workers falling behind. payment.

“The increase in BNPL use, particularly among people with very low financial resilience, is extremely concerning,” Professor Harrison said.

“If left unchecked, BNPL has the potential to lead to an unmanageable debt burden very quickly.”

The Edinburgh research analyzed the transactions of 104,661 NHS and public sector workers who applied for a loan from the non-profit lender, Salad Money, but were rejected on the grounds that they were unable to to reimburse.

Salad Money, which commissioned the survey, provides loans exclusively to public sector workers.

Analysis of 174 million anonymous bank transactions made by public sector workers found that 54% of them were fired by direct debits, a key indicator of financial hardship.

The findings were part of a report which showed many civil servants would struggle to pay an unexpected £100 (A$165) mid-month bill because staff whose transactions were analyzed had, on average, no , that £79 (A$130). ) in their account at that time.

The report also found that BNPL users spent more relative to their income and tended to have higher overdrafts, while a significant minority were heavily in debt.

London, September 22, 2022

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