Aussies plunge further into debt

MONEY spent by Australians on buy now, pay later schemes has doubled during the COVID-19 lockdown plunging consumers deeper into debt.

As people reach out for financial help, transaction data obtained by News Corp from 7000 bank accounts linked to comparison site Finder’s mobile app has revealed more than $1.19 million was spent with providers like Afterpay and Zip Pay in May.

The jaw-dropping figure is double what was spent in February and a far cry when compared to one year ago when Australians splashed about $345,000.

Total spend through BNPL providers ballooned during the course of the pandemic, climbing from about $560,000 in February against a backdrop of growing unemployment and financial hardship.

It has also been identified as a major debt problem in a nationwide survey that found almost one in two financial counsellors reported at least half their clients owed money to BNPL providers, according to the National Debt Helpline.

The helpline received more than 40,000 calls for advice from March to May across Australia, with 10,273 in NSW, 4889 in Victoria, 7786 in Queensland and 4961 in South Australia.

National Debt Helpline community engagement director Maura Angle said the organisation was “always concerned” about these providers and had urged people to

“avoid using them as much as possible”.

Ms Angle said the Finder figures were “scary”, and while call volumes to the Helpline were about on par with last year, the situation was likely to worsen.

“That’s to be expected because it takes a few months for people to start getting into trouble with buy now, pay later,” she said.

She said consumers were at risk of falling into this debt trap as they might feel their cashflow was shored up due to increased welfare payments and lenders’ offering deferred payments.

Ms Angle said these schemes were too easy to access and should be regulated like other credit providers.

BNPL providers have been subject to intense criticism as they are not regulated under the National Credit Act.

“Although they say they don’t charge for credit, it still has the same effect especially if someone is using a credit card to pay them off,” she said.

While they do not charge interest, she said they instead sting customers with other fees.