For release 02 February 2023

BUY NOW, PAY LATER LEAVING VICTORIAN FAMILIES IN FINANCIAL PAIN

A recent survey on Victorian consumers shows families make up a significant proportion of Buy Now, Pay Later (BNPL) users, and shows some BNPL users take out as many as 10 loans at time, leaving them in financial stress now and later.

The Consumer Policy Research Centre (CPRC) survey found a higher proportion of single parents and couples with children who took out BNPL loans, asked for payment assistance and reported they had missed BNPL repayments compared with other household compositions.

Approximately 1 in 10 families showed signs of financial stress and also took out BNPL products, compared to 1 in 20 Victorians without children.

CPRC CEO, Erin Turner said the cost-of-living crisis may be a factor in families reaching for BNPL loans.

“It is clear that some people are borrowing just to get by rather than for frivolous spending,” Turner said.

The survey measured indicators of financial stress among people who had taken out a BNPL product in the last six months and found that one in five (20%) people who took out a BNPL said they had asked for payment assistance, and 18 per cent had to miss a repayment on a BNPL loan, resulting in late fees.

Additionally, the majority of people who took out BNPL loan in the previous 6 months reported they took on multiple BNPL loans at the same time.

“Our data shows a quarter of people who use BNPL took out a single loan at a time, but one in fifteen BNPL users had more than 10 BNPL loans at the same time.

BNPL providers are not required to conduct credit checks to identify if someone has large outstanding debts.

Turner says there is need for real oversight from the regulator for the sector rather than a voluntary code monitored by the industry itself.

“There’s evidence that people taking out BNPL loans are often struggling to get by.

“We need BNPL providers to adhere to the responsible lending laws that that the big banks are required to do when handing out loans.”

The research also found a higher proportion of Victorian BNPL users experiencing financial vulnerability and stress:

  • 62% of BNPL users couldn’t raise more than $2000 in an emergency compared with 39% of all Victorians
  • More than three times as many BNPL users (40%) borrowed money from friends or family compared with 13% of all Victorians.
  • Twice as many BNPL users (22%) went without a meal to due costs compared with 9% of all Victorians.
  • Three times as many BNPL users (16%) sought community help or emergency relief (from Foodbank or Vinnies etc.) compared with 5% of all Victorians.

 

The rate of consumers reporting payment difficulties with this new form of credit now rivals credit cards and personal loans, but the consumer protections are much weaker.

CPRC supported the joint submission of consumer groups calling for full regulation of BNPL providers.

More information, including go to the full report, Buy Now, Pain Later.

The survey forms part of a greater Victorian Consumer Survey research to better understand the lives of Victorian consumers – their behaviours, actions taken and experiences on a range of topics.

CPRC CEO, Erin Turner is available for interview on request contact media@cprc.org.au or ph: 0493 539 466.