Good Shepherd, Australia’s oldest charity supporting women, girls, and their families, is calling on the government to fully regulate Buy Now Pay Later (BNPL) as a credit product to ensure customers have access to safe, affordable, and transparent credit options.
Good Shepherd’s recently published report on BNPL, uses unique client data and financial counsellor’s insights to highlight the harms of the unregulated products, particularly among women, sole parents, and family violence victim-survivors.
Good Shepherd Director, Research, Advocacy and System Impact, Dr Ros Russell said that while mounting debt is challenging for the average Australian, economic insecurity is linked with an increased risk of intimate partner violence.
“Sadly, the national research is consistent with what we are seeing among our clients – unmanageable BNPL debt is eroding the safety of women experiencing violence and is interfering with their recovery,” Dr Russell said.
BNPL products are increasingly being used as an avenue for financial abuse, whereby women are being coerced into BNPL debts by abusive partners, or BNPL accounts are being fraudulently opened in their name without their knowledge.
One in four of Good Shepherd’s Financial Counselling and Capability practitioners see coercive debt in at least half of their clients using BNPL with 53 per cent of practitioners seeing it more than a year ago.
Good Shepherd Financial Counselling client and single mother, Sonja* thought Buy Now Pay Later seemed like a reasonable option at the time.
“It seemed like a smart idea – you get what you need and pay it off over time,” Sonja said.
“But I was in a violent relationship and was financially controlled for a long time. He made me take out multiple BNPL accounts again and again, and they were just approved. No questions asked.
“Thankfully Good Shepherd’s financial counselling services helped me get out of debt and learn how to manage my money.”
Good Shepherd is calling on the government to implement Option 3 from The Treasury’s Regulating Buy Now, Pay Later in Australia Options paper that prevents unaffordable BNPL debts, unmanageable multiple accounts, and misleading marketing, including:
Closing regulatory loopholes to ensure consistent consumer protection, with a focus on preventing unaffordable BNPL debts, unmanageable multiple accounts, and misleading marketing of BNPL.
Prioritising financial abuse prevention in the BNPL regulatory regime.
Strengthening debt-free financial support for family violence victim-survivors, by increasing the amount and accessibility of the Federal Escaping Violence Payment.
Establishing a minimum income floor by increasing income support base rates (including JobSeeker) to at least the Age Pension level.
Maximising alternatives to BNPL, by supporting the promotion and delivery of No Interest Loans, and ensuring people have a regulated right to instalment payments for essential services.
Good Shepherd’s 2022 practitioner survey, found that:
Approximately 73 per cent of practitioners say that clients have missed essential payments, or cut back on or gone without essentials, to service BNPL debt.
25 per cent of practitioners see coercive/abusive debt in at least half of their clients using BNPL.
84 per cent of practitioners report that clients with BNPL debt have tried to manage the debt by opening additional BNPL accounts.
75 per cent of practitioners report BNPL use for children’s needs such as clothing and baby products.
BNPL is used by 25 per cent of our financial counselling clients who rely on social security as their main income source.
One in four Financial Counselling and Capability practitioners see coercive debt in at least half of their clients using BNPL.
Rates of coercive BNPL debts appear to be increasing: 53 per cent of practitioners report that they are seeing it more than a year ago.
