How to use BNPL platforms safely while Buy Now, Pay Later debts are growing

Are you struggling with your Buy Now, Pay Later (BNPL) repayments? You’re not alone, according to a new BNPL report released. However, it is possible to use BNPL platforms safely and responsibly – it may just take some adjustments.

The number of financial counselling clients struggling with Buy Now, Pay Later (BNPL) debts has increased significantly in recent years, according to a new BNPL report from Good Shepherd Australia and New Zealand.

The report shows that between 2017 and 2021, Good Shepherd’s financial counselling clients with BNPL-related debt skyrocketed eight-fold.

• 60% of practitioners say that half, most, or all their clients have BNPL debts.
• 73% of practitioners say that clients missed essential payments, or went without essentials, to service BNPL debt.
• 84% of practitioners report that clients with BNPL debt have tried to manage it by opening additional accounts.
• 25% of practitioners see coercive/abusive debt in at least half of their clients using BNPL. 

The groups with highest BNPL use are women, younger people, single parents, and people living on lower incomes. The Good Shepherd BNPL Report suggests that its usage is a highly gendered phenomenon, tied to women’s economic insecurity.

Good Shepherd Director, Research, Advocacy and System Impact, Dr Ros Russell said: “We know firsthand that too many of our clients using BNPL products are suffering financial stress and hardship and that they are using them for life’s essentials for things like food, electricity bills and nappies.”

“And while these debts are problematic for the general community, the consequences can be even worse for victim-survivors of family violence. We know that economic insecurity can leave women with no other choice than to return to an abusive relationship.”

“We need to close regulatory loopholes and plug safety net gaps to ensure women, girls, and their families are safe, well, strong and connected,” Dr Russell said.

Recommendations to address BNPL debt risks

Good Shepherd’s BNPL Report has offered clear recommendations for the development of a regulatory regime that prevents unaffordable BNPL debts, unmanageable multiple accounts, and misleading marketing.  

These recommendations include, but are not limited to:

1. Establishing a minimum income floor.
2. Ending the use of payment reduction or withdrawal as a social security compliance tool.
3. Restricting usage to individuals casually employed.
4. Close regulatory loopholes to ensure consistent consumer protection.
5. Provide consistent and accessible payment difficulty support over the lifecycle of BNPL services.

Good Shepherd Australia New Zealand Family Violence Financial Counsellor, Holley Dumble said: “Even where clients are showing clear signs of hardship, BNPL providers are not obliged to provide hardship support.

“While some providers are voluntarily offering hardship programs, BNPL hardship assistance is inconsistent and largely inadequate,” Ms Dumble said. 

How to more safely use BNPL platforms

Stronger regulation, and meeting the aforementioned recommendations, could go a long way in preventing significant debt and financial stress caused by BNPL platform usage. It’s crucial that we protect the more vulnerable members of our community, particularly when it comes to gendered economic insecurity and instances of financial abuse.  

It is important to keep in mind that BNPL platforms, like credit cards or any other credit products, are financial tools. These tools can be used safely and effectively if you are in a healthy financial position and have the financial literacy and knowledge to do so.

If you are a long-time user, or contemplating signing up for a BNPL platform, it may be worth considering the following tips:

• Read your terms and conditions. Do you know the fee structure of your platform if you’re not able to meet your repayments on time? It may be worth familiarising yourself with the terms and conditions, so you understand the risks, and how to avoid accruing pesky fees and charges.
  
  
• Minimise fees. Not all platforms hit you with the same number and amount of fees and ongoing charges. Consider comparing your options carefully, as there are some platforms that do not charge establishment fees, for example. 
  
  
• Set spending limits. Be realistic about your income and budget and set your own spending limits. Do not just rely on the spending caps enforced by the BNPL platform. After all, just because you can spend, say, $1,000, doesn’t mean you realistically can afford to. 
  
  
• Platform limiting. Consider limiting yourself to using one BNPL platform at a time to reduce the number of cross-platform payments to juggle, and fees you may have to pay.
  
  
• Resist impulse buying. Black Friday, Cyber Monday and other holiday sales can be tempting, but it may be worth considering giving major purchases at least 24 hours waiting time to reduce any chances of impulse buying.
  
  
• Ask for help. If you find yourself struggling to meet repayments or in financial stress, reach out to the BNPL platform immediately. While there is more that can be done in terms of hardship support, the major platforms will have policies in place. 

If you or someone you know is impacted by sexual assault, family or domestic violence, call 1800RESPECT on 1800 737 732 or visit www.1800RESPECT.org.au. In an emergency, call 000.

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