People are turning to buy now, pay later services like Afterpay and Zip to cover the cost of everyday essentials. Subscribe now for unlimited access . Login or signup to continue reading $ 0 / $ NaN /year All articles from our website The digital version of Today's Paper Breaking news alerts direct to your inbox All articles from the other regional websites in your area Continue Financial counselling services have seen an increase in people falling into the "trap" of using these payment methods for necessities like groceries, fuel and dental bills .
They say low-to-middle income earners are most at risk. Aoife Berenger is the director of operations at Care, a financial counselling service. She said buy now, pay later was once used for luxury items and as an alternative to lay-buy, but has now become a necessity for some households .
The payment method typically allows shoppers to split the cost of an item over four repayments without interest, though fees apply for late payments and defaults. While they have benefits to consumers, buy now, pay later products are not regulated in the same way credit cards are. Some people who use the service don't see it as a debt, Ms Berenger said.
"It's a trap for people and it's not a trap for high-income people. It's a trap for mid-to-low income people and that is a concern for us," she said. Care has seen instances of people using the service to pay for children's clothing and medical bills.
"We've seen people using it for dental and we all know how expensive it is to fix your teeth," Ms Berenger said. Aoife Berenger, director of operations at Care, a financial counselling service based in Turner. Picture by Sitthixay Ditthavong More concerning was the fact that clients were using multiple providers and making several purchases with each of them, she said.
Some, including people leaving domestic violence situations, see buy now, pay later as their only option to pay for household essentials, Ms Berenger said. "It's a vicious cycle that's really hard to break," she said of the payment method. More than a dozen providers in the market There are more than a dozen buy now, pay later providers in Australia.
Alongside the most well-known brands such as AfterPay, Zip and Klarna, leading banks have also launched their own products. Commonwealth Bank, Westpac, NAB, ANZ and Suncorp all have their own versions of buy now, pay later. Customers are drawn to buy now, pay later providers as they can be cheaper and easier to access when compared with traditional products such as credit cards.
A voluntary code of conduct exists, however buy now, pay later products are not bound by the laws that apply to other forms of credit. An amendment bill is before Parliament that, if passed, would see buy now, pay later providers included in the National Consumer Credit Protection Act, requiring them to hold an Australian credit licence. It also seeks to establish low cost credit contracts - which buy now, pay later falls under - as a new category of regulated credit and to create new regulation-making powers for these types of contracts.
Assistant Treasurer and Minister for Financial Services Stephen Jones said the measures would strike a balance between appropriate consumer protection and allowing consumers to enjoy the benefits of buy now, pay later products. "If it looks and acts like credit, then it should be regulated as such," he said in June. Consumer groups provide evidence On Wednesday, the Senate standing committee on economics heard from groups who have long advocated for more regulation in the sector.
Consumer advocacy organisation Choice represented groups including the Consumer Action Law Centre, the Salvation Army and Financial Counselling Australia. The group said buy now, pay later had increasingly appeared in the "debt mixes" of those seeking assistance from financial counsellors and community legal centres. "As with other traditional credit products, using buy now, pay later to pay for essentials is a recipe for disaster," Choice head of policy Tom Abourizk said.
Afterpay, which holds an Australian Credit Licence, supports the proposal for all low-cost credit providers to hold a credit licence. However the provider has made a range of recommendations for the bill including removing a proposed cap on late fees. National Debt Helpline: 1800 007 007 Share Facebook Twitter Whatsapp Email Copy Brittney Levinson Politics and public service reporter Brittney is part of the federal political bureau, covering politics, the public service and economics.
Brittney joined The Canberra Times in 2021 and was previously the property reporter. Got a news tip? Get in touch: brittney.levinson@canberratimes.
com.au Brittney is part of the federal political bureau, covering politics, the public service and economics. Brittney joined The Canberra Times in 2021 and was previously the property reporter.
Got a news tip? Get in touch: [email protected].
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