University of Edinburgh raises concerns that many unable to repay loans are offered ‘Buy Now Pay Later’ credit.’

19 September 2022: For the second year running, Salad Holdings commissioned the Credit Research Centre at the University of Edinburgh Business School to analyse the financial lives and behaviour of NHS and public sector workers applying for a loan from Salad Money.

This year’s analysis covered a reporting period to the end of January 2022 and drew on data from over ten times as many applicants as 2021’s work. It provides new insights into key workers’ financial resilience, use of credit, loans and Buy Now Pay Later products and rejected loan applicants’ behaviour.

Salad Money*, a social enterprise, makes its affordability assessments based on the income and expenditure shown in applicants’ banking data for up to two years previously. The University analysed nearly 174 million anonymised bank transactions of 104,661 applicants. For more than 90% of applicants, the University was able to observe more than a year’s worth of data. The researchers found:

  •  Many key NHS and public sector workers would struggle to afford an unexpected bill of £100.

  • More than 10% of 27,943 people declined a loan because they could not afford repayments and were subsequently offered credit by Buy Now Pay Later (BNPL) providers.

  • Six out of ten of the 104,661 individuals whose behaviour was analysed were BNPL users.

  • Use of BNPL accelerates over time, especially for medium and high users: BNPL users in the sample spend more relative to their incomes, have higher overdrafts, and a significant minority are heavily indebted.

The report, Financial Resilience and Credit Landscape of Public Sector Workers, raises questions about why many who cannot afford to repay a loan were granted credit by Buy Now Pay Later providers.

Lord Iain McNicol, Chair of Salad Money’s Public Responsibility Oversight Body, said:

“The report demonstrates why we need a purposeful, social-led approach to credit and financial inclusion. Seeing the fractured financial resilience of so many NHS and public sector workers is worrying. It is also alarming to see people still being offered credit by FCA-regulated firms and under-regulated BNPL providers, even though they’ve been turned down elsewhere for affordability reasons.”

What next?

*(Debt Hacker founder Alan Campbell also founded Salad Holdings and its subsidiary, Salad Money, a social enterprise offering affordable loans to key workers in the NHS and public sector).