Australians spiraling into debt as buy now, pay later, loans surge to cover day-to-day needs

Australians are seeking buy now, pay later (BNPL) loans to cover basic needs such as food and rent at an alarming rate as their empty bank accounts allow them to survive.

“A lot of people are struggling, they’re using credit cards to pay off those loans, they’re skipping meals, they’re skipping other bills for essentials or utility bills,” Patrick Veyret, senior policy adviser for the consumer group Choice, mentioned.

According to data from the consumer advocacy group, one in five people have used a BNPL service to pay for household items like groceries and rent in the past year.

Angliss Meats in Townsville only introduced the small loan scheme two weeks ago, but at least 50 people have already taken up the offer.

“It brought in a few more people,” butcher Ryan James said.

“They’re just really happy that we have him now, they can make their races a little easier.”

Ryan James says there has been a huge uptake of BNPL in his butcher shop.(ABC News: Sally Rafferty)

There is a $100 minimum spend at their Burdell store, but with meat prices soaring, Mr James thought BNPL was a big selling point.

“A lot of people don’t even tell us they use it, some of them just tap their card,” he said.

“We change our ticket prices every week.

“It’s ridiculous.

“I’ve been in this business for 10 years now and the price of our rump steaks has more than quadrupled. »

Calls to fill the gaps

BNPL services are largely unregulated, with providers having no legal obligation to verify that borrowers can repay loans.

“We’ve heard from financial advisers, who assist people in debt, that some people have 10 or 11 loans,” Veyret said.

“One person had 11 loans to pay every fortnight and that’s because these new lenders don’t have to do proper credit checks.”

He said borrowers who fail to repay on time face stiff penalties.

“Most vendors charge people late fees and the research we’ve seen has shown that sometimes those late fees actually mean that buy now, pay later is more expensive than a credit card,” said he declared.

Afterpay and Zip advertising stickers on the window of a clothing store.
Stores selling basic necessities now routinely offer buy-it-now, pay-later in-store options.(ABC News: John Gunn)

There are up to 15 different BNPL providers in Australia, each with their own terms and conditions.

“A number of new players appear every month, Mr. Veyret said.

“Some people think buy now, pay later is the darling, when in reality this is an unregulated credit service and we’re seeing payday lenders trying to cash in on it.”

Choice has joined global calls to regulate the industry in light of the rising cost of living.

make the rent

Small loans have also been extended to include regular payments such as rent.

Real Estate Institute of Queensland (REIQ) chief executive Antonia Mercorella said it was a worrying trend caused by rising rental costs.

A smiling woman in a conference room.
REIQ chief executive Antonia Mercorella says rising rents encourage people to offer more than they can afford.(ABC News: Mark Leonardi)

“We’re starting to see people offering beyond the asking rental price, which could lead to people offering money that isn’t necessarily affordable to them,” she said.

Ms Mercorella said that while reliance on BNPL loans to cover rent had not been widespread so far, she feared the situation could get worse.

“These programs are becoming more and more attractive,” she said.

“What is of particular concern is how these programs are used to pay for essentials.”

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