One in seven users of credit from buy-now-pay-later providers such as Afterpay or Zip had more than 20 loans last year, according to new data from consumer group Choice.
The Choice survey also found that consumers were using BNPL services to cover essential bills, with one in six using the short-term loans to cover supermarket purchases and 14% to pay for power.
BNPL has boomed in popularity in Australia but most of the companies offering it have struggled to turn a profit, crushing their share pricests, and the sector faces a looming regulatory crackdown over concerns about consumer debts.
The heavy use of BNPL revealed by Choice’s survey is “extremely concerning”, the organisation’s head of policy, Patrick Veyret, said.
“Our research shows that buy now pay later is effectively sold as a regular line of credit, but without any of the important consumer protections.
“So many families around Australia are having to draw on buy now pay later, week after week, but the lenders really have no legal obligation to conduct affordability checks.”
Regulation of the sector is to be beefed up by the Albanese government, with the minister for financial services, Stephen Jones, set to release a consultation paper next month outlining options to bring regulate BNPL products in the same or a similar way to ordinary credit.
In June, Jones told Guardian Australia arguing about whether or not BNPL products were credit was “a dead-end street” and he instead wanted to get on with regulating the sector.
The Albanese government has already moved against another problem credit product, payday lending, introducing a bill to parliament last week that includes an anti-avoidance provision – designed to stop lenders changing the form of their offering to avoid caps on interest rates and other consumer protections – along with other changes recommended by the banking royal commission in 2019.
Veyret said Choice had seen examples of people who had taken out BNPL loans with nine or 10 different providers.
“That becomes extremely tricky to manage in terms of paying that every fortnight and we think there should be much stronger obligations on these lenders to conduct affordability checks and to make sure that people can afford the loans,” he said.
He said it was shocking to see people forced to use BNPL products to pay for essentials as inflation soars.
“As the cost of living crisis worsens, more and more people are being forced to purchase these unregulated loans and risk being trapped in a debt cycle,” he said.
The survey also found that BNPL products were riskier for families – people with dependent children were more likely to have been late with a payment that people who did not have children under 18 in their household.
“I think it is telling that – and concerning that – families with children are doing it toughest right now with the cost of living crisis, and with trying to put food on the table and to keep power bills going,” Veyret said.
The BNPL results came from Choice’s most recent quarterly consumer pulse survey of 1,083 Australian households, conducted using an online panel between 13 to 28 June.
