The BNPL sector continues to record high levels of defaults and bad debts compared to other forms of regulated credit, reflecting the unsuitability of BNPL loans for a large portion of their customers.
Despite the pitfalls, such as the accrual of multiple late fees and other charges when things go wrong, BNPL is still seen as a convenient option when making purchases, with some retailers reporting BNPL being used for the majority of online sales.
Although this might be good for business, the evidence shows that this type of product can also negatively influence consumer behaviours, for example, by encouraging them to overspend when they don’t necessarily need certain products.
The reality is that BNPL products allow young people and low-income earners to take out multiple forms of credit in a relatively short period of time.
We are seeing BNPL not just being used as an alternative form of credit, but in addition to other forms of credit, with vulnerable consumers relying on BNPL loans to pay for everyday living expenses such as food and bills when they find themselves in financial hardship.
BNPL products are an easy tool for financial abuse perpetrators to manipulate, leaving victim-survivors with unmanageable debt after having BNPL accounts fraudulently opened in their names online.
Customers also often prioritise BNPL payments so they can continue to have access while neglecting other financial commitments and debts.
With the BNPL voluntary code of practice insufficient to protect consumers, stronger industry regulation and enforceable consumer protections are necessary to prevent further harm from BNPL products.
RLC regularly assists people who present with debt issues and financial abuse issues stemming from the use of various BNPL providers.
If you need support, contact RLC’s credit and debt service or our Financial Abuse Service NSW for free confidential legal help. Phone 02 9698 7277 or visit www.rlc.org.au/contact
See also
Increasing the safety of Buy Now Pay Later products and payday loans (RLC, 12 May 2022)
Buy now, pay later companies on the brink as bad debts and interest rates rise (ABC Business, 21 June 2022)
Australians double spending through buy now, pay later services, to $11.9bn (ABC 730, 29 June 2022)
