Lending needs to be safe and suitable to prevent harm
Anglicare Tasmania supports the call from consumer groups and financial counsellors for greater protections for people taking out small Buy Now Pay Later (BNPL) loans.
The Federal Government’s announcement on May 22 that BNPL products would be brought within the Credit Act was welcome but there are concerns regulation may not go far enough, says Mary Bennett from Anglicare Tasmania’s Social Action and Research Centre.
“Last month Anglicare Tasmania released a report Buy Now, Struggle Later? that was based on data from our financial counselling service and a survey of financial counsellors,” she said.
“Our data showed people rapidly becoming over-committed with spiralling debts, particularly when they had multiple accounts. We know that many Tasmanians who use BNPL are on low and fixed incomes and even small purchases with this type of credit can lead to bigger problems,” said Mary.
Our concern is that the Government’s proposal may not place sufficient responsibility on credit providers to assess the risk of harm to the individual consumer.
Client stories *
Craig, 49, is married and lives with his partner and young son in rural Northern Tasmania. He suffers from both psychiatric and physical health conditions and receives disability support. Craig’s issues date back to when errors were made in the payments he received. It took Centrelink some time to deal with the matter, which was eventually resolved in his favour. During that time, he used BNPL for living expenses, which he now regrets. This included purchasing gift cards which were used to buy groceries. Credit with six different providers has spiralled into $7,000 of debt, as well as $1,000 for other debts. The repayments far exceed what he can manage on the Disability Support Pension and the family are $2,000 in rent arrears. Craig’s mental health is suffering and he feels like a burden.
Brooke is a single mother in her late 20s living in public housing in North West Tasmania. She works part time in child care. Brooke has an annual income of $63,000 and does a lot of shopping online. She has over $3,000 in BNPL debts, with the majority of her purchases being under $100. A Financial Counsellor has worked out a fortnightly budget for Brooke and after rent, bills, groceries and debt repayments, she has only $45 to cover health, recreation and children’s clothes and education expenses.
*Craig and Brooke are real Tasmanians who have been supported by Anglicare’s financial counselling team. We have changed their names in order to protect their privacy.
Anglicare Tasmania’s Buy Now, Struggle Later? research report (Dr Alexandra King, Social Action and Research Centre)
Anglicare’s financial counselling service
Last year, Anglicare Tasmania’s financial counsellors delivered more than 4,700 hours of services to more than 2,100 people. The service is FREE and confidential.
Contact the service via the National Debt Helpline on 1800 007 007 or find out more on the webpage link above.