Buy now pay later credit has become one of the most common forms of debt in financial counselling casework, a Financial Counselling Australia survey has found.
Responses from more than 500 counsellors showed that BNPL is being used increasingly to pay for essentials.
“While most BNPL loans are for small amounts, they cause big problems,” the FCA report said.
The survey revealed that 62 per cent of financial counselling clients have BNPL debt. The average number of BNPL accounts held by consumers seeing counsellors was 3.2, although counsellors reported having clients with as many as eight accounts.
Eighty-two per cent of counsellors said their clients were using BNPL to pay for retail goods, such as clothing and electrical goods, 71 per cent said their clients used it to buy food and 41 per cent said clients used it to buy petrol.
Counsellors said cost of living pressures meant more of their clients were using BNPL for essentials.
Counsellors said reliance on BNPL was leaving clients in a worse financial position, putting them into a debt spiral, and that BNPL providers’ hardship practices were falling short.
In May, the Minister for Financial Services Stephen Jones said the government would regulate the BNPL industry under a “light touch” regulatory model. The government is yet to provide detail of this model.
Counsellors responding to the survey said regulation should be an urgent priority, given the harm BNPL is causing.