I’m a welfare recipient who relies on buy-now-pay-later services such as Afterpay and Zip to manage my expenses. Like many, I use them to pay bills, buy groceries and cover unexpected or larger expenses. I also use it to save money by buying larger quantities less frequently or enough to get free shipping.
People in poverty aren’t stupid. We know these organisations are out to make money from us. We know they’re predatory. I resent the buy-now-pay-later (BNPL) industry because I know their business model is built on people falling behind on what they owe and aggressive marketing designed to increase the amount of debt we take on.
I resent needing any form of credit, but the appalling rate of Centrelink payments leaves me with little choice. These products can offer a lifeline, especially if you have a bad credit history, as I do.
I’m not alone. That’s why when Financial Services Minister Stephen Jones recently announced new rules for BNPL products, I and many others began to fear the implications. In response, welfare recipients began sharing stories of how BNPL helps them survive, while also highlighting flaws in the industry.
People soon started lecturing us, telling us we shouldn’t be using these services for products we “can’t afford”, even when they were absolute essentials. They began “educating” us on how to save money, as if we don’t already know, and saying we should instead use other, more expensive and bureaucratic forms of credit.
We shouldn’t use BNPL because it has harmed others with irresponsible lending leading to debt spirals, we were told — the expectation being that poor people should bear the cost of the government’s failure to ensure everyone’s needs are met.
However, we are the experts in our own lives, and regulating BNPL risks harm to many of us who rely on it. Changes will reportedly empower companies to decide whether something is “unsuitable” for the buyer, undermining our agency because it’s assumed poverty is the result of bad decisions, rather than a lack of money.
“Our plan prevents lending to those who cannot afford it,” Jones said.
But conventional measures of what people in poverty can “afford” are based on paternalistic attitudes. They’re also rooted in a lack of understanding of our ability to juggle finances to walk the solvency tightrope — an ability strengthened by access to BNPL products.
Non-profit organisations claiming to speak for us are advocating for reforms, which they claim will protect people in poverty by further restricting our access to credit. But this advocacy neither understands the full picture nor provides nuanced solutions.
According to Good Shepherd: “There’s always a point where [BNPL] becomes a problem.” The logic is flawed. While every person who needs help from a financial counsellor because of these products has surely been harmed by them, not every poor person who uses BNPL inevitably needs help.
Good Shepherd surveyed 33 of its staff and used internal data to inform its views. At the Antipoverty Centre, we recently surveyed 179 people about their experiences using BNPL products, 131 of whom are living below the Henderson poverty line, most significantly below it.
Unsurprisingly, people overwhelmingly said they’re suffering from spiralling living costs, with 27% having to use some form of borrowing to survive. Of those, 70% use a BNPL product. Only 29% of welfare recipients using BNPL said they felt marketing was fair and transparent; 78% said they use it for things they cannot go without; all said they also skip more basics or spend less on them than they did a year ago.
Although 55% said they find it hard to make repayments on time, only one in five had fallen behind or incurred a fee in the preceding month.
Protecting people from predatory lending isn’t as simple as tightening rules for BNPL, but nor should things stay as they are. As Good Shepherd’s report shows, there’s no question these companies harm people. There are plenty of unethical practices to crack down on without handing over control of our purchasing decisions.
One example is the government’s proposal to cap fees for missed payments. While tougher rules on marketing are welcome, they should go further than prohibiting providers from increasing a customer’s spending limit. They shouldn’t be allowed to use direct marketing about limit increases at all.
Most importantly, Labor should strengthen, enforce and promote the ACCC debt collection guideline, which most people have never heard of.
Politicians know income support payments are unliveable. If the government was serious about ending harm caused by the lending products we use, they’d do the obvious and necessary thing: ensure every person who needs support is able to access a Centrelink payment above the poverty line.
