‘Struggling to pay for food’: Financial counsellors report spike in buy now, pay later debt

Buy now, pay later debt is a growing problem for clients of financial counsellors.

Buy now, pay later debt is a growing problem for clients of financial counsellors. Photo: TND

Disability pensioner Jackie is still struggling to pay back a $4000 buy now, pay later debt she used to fund urgent dental surgery.

Her use of the service started with just two purchases of $100.

But since using BNPL to cover her dental bills, Jackie has had to borrow money from friends and family and apply for vouchers to help her pay for utilities.

“My stress levels are way beyond what they should be,” she said.

“Every day you start to think of every cent that’s in your bank and how much they’re going to take; and if you’re late, that’s another fee.”

Now, Jackie wants anyone considering using a BNPL provider to pay for Christmas presents to consider the impact on their wallet after festivities are over.

“I would say stay away, because you just don’t know what you’re getting into,” Jackie said.

“After Christmas you’re still going to have to pay for it.

“It’s just really not worth it – it really isn’t.”

‘Struggling to pay for food’

Jackie is not alone, with more than four out of five financial counsellors (84 per cent) saying between half and all of their clients have BNPL debts, compared with only about one-third (31 per cent) a year ago.

The figures were contained in a new survey released by Financial Counselling Australia on Monday.

“Financial counsellors are seeing more and more clients with buy now, pay later debt and that debt is causing real financial harm to lots and lots of people,” chief executive Fiona Guthrie said.

“They’re struggling to pay for food. They’re struggling to pay their rent and to meet their day-to-day living expenses.”

Almost two-thirds (61 per cent) of the 248 counsellors surveyed said most or all of their clients with BNPL debts find it difficult to meet basic living costs.

Almost all of the survey respondents said BNPL should be covered by the national credit code to safeguard consumers.

Ms Guthrie said the federal government must launch an independent review of the industry so it can operate in a way that does not cause harm.

Australia’s largest BNPL service Afterpay allows people to pay for a purchase over four fortnightly instalments that are automatically processed using consumers’ credit or debit cards.

If you don’t have enough funds to make the payment on the due date, you’re charged a $10 late fee and a further $7 if the payment is still unpaid after a week.

Afterpay recently expanded its service to hospitality venues, meaning you can now pay in instalments for a night out at some pubs.

National Debt Hotline financial counsellor Deb Shroot said some people have up to seven or eight BNPL debts with several providers, on top of credit card debts and personal loans.

“What this means is that potentially they were able to afford maybe one $25-a-fortnight payment,” Ms Shroot said.

“But when you multiply this by the number of purchases they have made, it’s made it really unaffordable for a lot of people and they’re falling into hardship.”

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