Strong consumer protections needed

illustration of a piggy bank

April 3 2023

Anglicare Tasmania today released new research that highlights the need for government to ensure strong consumer protections on Buy Now Pay Later (BNPL) products.

The report Buy Now, Struggle Later? is the first research to explore the impacts of BNPL amongst Tasmanians who have used a financial counselling service.

It is based on data from Anglicare’s Financial Counselling service and a survey of financial counsellors. Last year, Anglicare Tasmania’s financial counsellors delivered over 4,700 hours of services to more than 2,100 people.

The Anglicare report showed that many Tasmanians are using BNPL to buy essentials including food and groceries.

“This is a growing problem,” said Dr Alexandra King, a researcher with Anglicare’s Social Action and Research Centre. “Buy Now Pay Later debts are more common than a year ago and many people are struggling to repay them.

“BNPL debts add another layer of complexity and difficulty to an already complex picture of indebtedness,” she said. The average value of BNPL debts amongst clients was $2,200.

Financial Counselling Australia CEO Fiona Guthrie said the report confirmed what counsellors across the country were seeing and strengthened the case for adequate regulation of BNPL in the same way as all other credit products.

“These findings back what is happening nationwide – soaring numbers of people resorting to BNPL just to get by and, consequently, soaring numbers of people dealing with BNPL debts.

“Counsellors often hear from people with multiple accounts, with repayments coming out of their accounts at different times, making it harder to budget. Some people find themselves in a debt spiral.”

As well as adequate regulation, the report also recommends the Australian Government raise the rate of income support payments above the poverty line. “This would reduce people’s risk of debt from Buy Now Pay Later and high-cost credit products,” said Dr King.

Tasmanians with BNPL debts are more likely to be female and aged under 25.

“The research showed that all of the clients with Buy Now Pay Later debts were experiencing at least one type of social or economic disadvantage,” said Dr King. “This includes people who reported being affected by mental illness or having a psychiatric disability”.

The research found 1 in 5 of people with a BNPL debt was a recent victim survivor of family violence. The responsible lending obligations under the credit code would help protect people from financial abuse.

Ms Guthrie agreed the growing toll of financial hardship from BNPL debts should be all the evidence the Government needs to regulate the product appropriately under the National Credit Laws.  “Essentially, these providers are exploiting loopholes that need to be shut down before any further harm is done.”

Read the full report here.


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