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Highlights:
- Rising popularity of BNPL services in Australia has become ‘extremely concerning’ these days.
- Australians are using BNPL products a lot to pay their essential bills.
- With the rising inflation rate in Australia, paying essential bills through BNPL services has led people towards infinite debt cycles, states this survey.
Recent data from a survey conducted by the consumer group Choice has revealed that one out of every seven credit users from buy-now-pay-later (BNPL) providers like Afterpay or Zip Co Limited (ASX:ZIP) had more than 20 loans last year.
Although the BNPL sector has become quite popular in Australia, most companies involved in this business have struggled hard to turn a profit. As a result, the sector has faced a looming regulatory crackdown due to concern about the debts of its users.
The survey also revealed that the users were primarily using BNPL services to pay their essential bills. Some people were also using BNPL services or short-term loans to pay their supermarket bills and 14% to pay for power.
The excessive usage of BNPL services in Australia, as revealed by the survey, is “extremely concerning”, said Patrick Veyret, the head of policy of the organisation.
Patrick also mentioned that the BNPL services are getting effectively sold these days in Australia as a regular line of credit. However, there is an absence of consumer protections involved in these services. Several families in Australia are constantly drawing BNPL services multiple times a month. However, the money lenders do not have any legal obligation to conduct affordability checks.
Choice’s survey also discovered that these BNPL products have proven to be riskier for families where there are dependent children as compared to those families who do not have children under 18 in their house.
In the present situation, where the inflation rate is soaring in the country, such BNPL loans lead people to get trapped in a never-ending cycle of debt.
At present, the Australian government is strengthened with the appointment of finance minister Stephen Jones. Stephen is expected to look into the rising concern in Australia involved with the BNPL sector. Stephen is ready to release a consultation paper in October outlining several options to introduce regulating BNPL products similarly to ordinary credit.
Recently, the Albanese government addressed the issue of credit products and payday lending by introducing a bill to the parliament. The bill includes an ‘anti-avoidance’ provision which is designed to prevent money lenders from changing the form of their credit offering and avoid caps on interest rates and other consumer protections, along with some additional changes suggested by the banking royal commission in 2019.
