“Buy now, pay later” loans are unlawfully being offered to children shopping online, according to Dutch financial authority AFM.

In its latest annual report, it warned that last year almost 600,000 loans were issued to bank accounts belonging to children aged between 13 and 17.

It is only legal to offer credit to adults in the Netherlands and registered providers of “buy now, pay later” loans have signed up to a code of conduct saying they will only lend to over-18s.

“New risks for debts are piling up,” said Laura van Geest, chairwoman of the AFM, in a statement. “Particularly young persons are being exposed to the temptations of [buy now, pay later] quick and easy credit, excessive trading in cryptos and finfluencers. While legislation is on the horizon, it remains imperative to anticipate this in time to avoid any major problems.”

Buy now, pay later loans allow people to make purchases online on credit that must be repaid 14 or 30 days after delivery, or in instalments. They are free or have a small fee if payments are made on time – however “reminder” costs are an average of €15 if a payment is missed. “This makes it an expensive form of credit,” the AFM says on its website.

Its market update research, also presented on Tuesday, suggested that these loan providers processed 45 million transactions worth €4.8 billion in 2022. The fastest-growing group of users is those between 18 and 24, while consumers under 35 are most likely to incur late payment fees and be passed to debt collection agencies. “The costs associated with late payment can be substantial,” warned the AFM.

In a separate publication, the AFM also raised an alert about the ease of online trading in crypto currencies via apps which in its view do not give proper warning that you can also lose money. “This entails the risk that consumers make decisions contrary to their own interests,” it said.

Advice commissioned by the government last year warned that the way in which debts are recovered in the Netherlands should be drastically changed because more than 600,000 households have problematic levels of debt.

An IMF paper last year on the risks of mortgage loans during a cost-of-living crisis found the Netherlands had Europe’s highest average household debt, at almost three times gross income.