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How the 'Buy Now Pay Later' system is setting vulnerable Australians up for failure


Need to know

  • Buy Now Pay Later [BNPL] schemes exploit a loophole in the law that means they don't need to comply with basic consumer protections. BNPL schemes are still not regulated in the same way as other forms of credit and there is currently no compulsory code of practice.

  • All big four banks market a version of Buy Now Pay Later schemes. The marketing of BNPL schemes normalise debt whilst putting the responsibility on the consumer to make sure they can afford it.

  • The Federal Government is looking to introduce new legislation that would regulate the Buy Now Pay Later (BNPL) industry under the National Consumer Credit Protection Act 2009 (Credit Act). Though the draft legislation is not expected to be available until the end of the year.


The Buy Now Pay Later [BNPL] system is fast becoming the new norm for a lot of Australians. But despite its growing popularity, the system fails to protect its users adequately from the number of potential pitfalls.

The BNPL system is a growing concern for Australian consumers with 2 in 5 Australians (43%) using a buy now pay later (BNPL) service in the past 6 months [1]. This is a considerable increase from 30 percent in June 2019 [2]. The number of Australians paying BNPL late fees has increased significantly since January 2020 when just 5% had paid a late fee in the last 12 months compared to 10% in January 2023 [1]. People aged 18–34 years are consistently paying the most in transaction and late fees [2].

Recently, Financial Counselling Australia published the Small Amounts – Big Problems report. The report found while 82 per cent of financial counsellors clients used BNPL to pay for general retail, such as clothing or electrical goods, a “concerning number” of people were also using it to pay for essentials [3].

More statistics from the Small Amounts – Big Problems report:

  • 71 per cent of counsellors said clients commonly use BNPL to pay for food

  • 41 per cent said clients commonly use it to buy fuel

  • 32 per cent said clients commonly use it for utilities, such as gas or electricity

  • 93 per cent said more clients are using BNPL for essentials generally.

In addition to using BNPL to pay for essential items, the ASIC review of BNPL detailed that 20 percent of consumers had cut back on, or went without, essentials such as meals to make their payments on time, and 15 percent of consumers surveyed said they had taken out an additional loan [2]. Of the consumers who missed repayments, the other payments that were missed were household bills (44%), credit card payments (32%), and mortgage payments (22%) [2].

What is the impact of indebtedness on consumers?

It is no surprise that indebtedness has a detrimental impact on Australian lives. A tragic and recent example of this being Centrelink's unlawful ‘robo debt’ scheme. Of the 2,030 people who died after being part of the scheme, between July 2016 and October 2018, 663 people were classified as "vulnerable", which includes people experiencing homelessness, domestic violence and mental health issues [6].

Individuals with unmet loan payments are more likely to have suicidal ideation and suffer from depression more often than those without such financial problems [7]. Unpaid financial obligations are also related to poorer subjective health and health-related behaviour [7].

Government Action

On 22 May 2023, the Treasury announced that the Buy Now Pay Later (BNPL) system will be regulated under the National Consumer Credit Protection Act 2009 (Credit Act), ending the existing self-regulation of BNPL by the industry. The legislation will adopt a consumer-centric approach to regulating the offering and distribution of BNPL products. Minister Jones announced that draft legislation will be available later this year for consultation from the industry and consumer groups, with an expectation that it will be introduced in Parliament by the end of 2023. While it is possible the new law will be enforced by the end of 2023, it may not take effect until 2024.

Blessing Bags Melbourne acknowledges and appreciates the government's efforts to regulate the BNPL system. However, it is essential to note that drafting, passing, and enforcing legislation can take time. During this period, more Australians may be affected by the BNPL scheme. It is predicted that over 50% of consumers will rely on BNPL credit to manage the current cost of living crisis. The slow-moving regulation has left vulnerable groups at risk without adequate protection. This delay may create long-lasting adverse effects for the less fortunate members of our society, highlighting the government's priorities.

If you or someone you know is struggling with debt there is help available:


  1. Binsted SU, Loewenthal JA [Internet]. Buy now pay later statistics 2023. 2023 Jun 15 [cited 2023 Aug 10]

  2. Australian Securities & Investments Commission. Buy Now Pay Later: An Industry Update. 2020 Nov 16 [cited 2023 Aug 10]

  3. Financial Counselling Australia, [Internet]. Small Loans, Big Problems. 2023 Jun [cited 2023 Aug 12]

  4. Eyers JA, Australian Financial Review [Internet]. One in five buy now, pay later users is missing payments. 20 Nov 16 [cited 2023 Aug 11]

  5. Johnson D, Rodwell J, Hendry T. Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing. Sustainability [Internet]. 2021 Feb 12;13(4) [cited 2023 Aug 11]

  6. Commonwealth, Royal Commission into the Robodebt Scheme. 2023 Jul 7 [cited 2023 Aug 11]

  7. Turunen E, Hiilamo H. Health effects of indebtedness: a systematic review. BMC Public Health. 2014 May 22;14:489 [cited 2023 Aug 11]


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