I’m a welfare recipient who relies on buy-now-pay-later services such as Afterpay and Zip to manage my expenses. Like many, I use them to pay bills, buy groceries and cover unexpected or larger expenses. I also use it to save money by buying larger quantities less frequently or enough to get free shipping.
People in poverty aren’t stupid. We know these organisations are out to make money from us. We know they’re predatory. I resent the buy-now-pay-later (BNPL) industry because I know their business model is built on people falling behind on what they owe and aggressive marketing designed to increase the amount of debt we take on.
I resent needing any form of credit, but the appalling rate of Centrelink payments leaves me with little choice. These products can offer a lifeline, especially if you have a bad credit history, as I do.
I’m not alone. That’s why when Financial Services Minister Stephen Jones recently announced new rules for BNPL products, I and many others began to fear the implications. In response, welfare recipients began sharing stories of how BNPL helps them survive, while also highlighting flaws in the industry.
People soon started lecturing us, telling us we shouldn’t be using these services for products we “can’t afford”, even when they were absolute essentials. They began “educating” us on how to save money, as if we don’t already know, and saying we should instead use other, more expensive and bureaucratic forms of credit.
We shouldn’t use BNPL because it has harmed others with irresponsible lending leading to debt spirals, we were told — the expectation being that poor people should bear the cost of the government’s failure to ensure everyone’s needs are met.
However, we are the experts in our own lives, and regulating BNPL risks harm to many of us who rely on it. Changes will reportedly empower companies to decide whether something is “unsuitable” for the buyer, undermining our agency because it’s assumed poverty is the result of bad decisions, rather than a lack of money.
“Our plan prevents lending to those who cannot afford it,” Jones said.
But conventional measures of what people in poverty can “afford” are based on paternalistic attitudes. They’re also rooted in a lack of understanding of our ability to juggle finances to walk the solvency tightrope — an ability strengthened by access to BNPL products.
Non-profit organisations claiming to speak for us are advocating for reforms, which they claim will protect people in poverty by further restricting our access to credit. But this advocacy neither understands the full picture nor provides nuanced solutions.
According to Good Shepherd: “There’s always a point where [BNPL] becomes a problem.” The logic is flawed. While every person who needs help from a financial counsellor because of these products has surely been harmed by them, not every poor person who uses BNPL inevitably needs help.
Good Shepherd surveyed 33 of its staff and used internal data to inform its views. At the Antipoverty Centre, we recently surveyed 179 people about their experiences using BNPL products, 131 of whom are living below the Henderson poverty line, most significantly below it.
Unsurprisingly, people overwhelmingly said they’re suffering from spiralling living costs, with 27% having to use some form of borrowing to survive. Of those, 70% use a BNPL product. Only 29% of welfare recipients using BNPL said they felt marketing was fair and transparent; 78% said they use it for things they cannot go without; all said they also skip more basics or spend less on them than they did a year ago.
Although 55% said they find it hard to make repayments on time, only one in five had fallen behind or incurred a fee in the preceding month.
Protecting people from predatory lending isn’t as simple as tightening rules for BNPL, but nor should things stay as they are. As Good Shepherd’s report shows, there’s no question these companies harm people. There are plenty of unethical practices to crack down on without handing over control of our purchasing decisions.
One example is the government’s proposal to cap fees for missed payments. While tougher rules on marketing are welcome, they should go further than prohibiting providers from increasing a customer’s spending limit. They shouldn’t be allowed to use direct marketing about limit increases at all.
Most importantly, Labor should strengthen, enforce and promote the ACCC debt collection guideline, which most people have never heard of.
Politicians know income support payments are unliveable. If the government was serious about ending harm caused by the lending products we use, they’d do the obvious and necessary thing: ensure every person who needs support is able to access a Centrelink payment above the poverty line.
Absolutely agree with you 100% on everything you’ve said. I am grateful to be in a position I don’t need to use BNPL anymore but it was a lifeline when I did need to use it. People who’ve never experienced financial hardship and had to do without basic essentials mostly do not have any understanding of what it’s like and I have personally experienced the judgmental attitude of well if you can’t afford it you shouldn’t have it – well what if the things you supposedly shouldn’t have are things you desperately need like food for your kids, a train ticket to work etc (and yes there was one stressful week when my husband could not go to work because we couldn’t afford the train ticket until we got paid). We’ve always worked hard, paid our taxes and met our debt obligations. I know a lot of people who are doing it tough and none of them are lazy, irresponsible or on welfare because they have other choices. I really dislike the attitude that many people hold that it’s your own fault you’re poor – actually in most cases it isn’t, the system is against you…
“Why do the powers-that-be presume that because people are poor they can’t run their own finances?”
The answer is almost self-evident. It is because the ‘powers-that-be’ are drawn, for the most part, from the ranks of the wealthy and the wealthy tend to view poverty as due solely to a failing on the part of the poor.
Poverty is due solely to a failing on the part of governments.
Not so.
See above.
Perhaps because they demonstrably cannot?
It is not low pay but excess expenditure which causes personal poverty.
Most people learn to cut their coat according to their cloth by adulthood.
Both seem to be, not just foreign concepts, but an abuse of their sense of entitlement.
The single highest cause of major debt amongst those under 30 are their phone plans.
The powers that be need to read some Terry Pratchett.
https://en.wikipedia.org/wiki/Boots_theory
Terry was a nailgun.
Excellent and timely article. Over the years I have been both financially poor and spent time time studying literature on the behaviour of people who, for whatever reason, were hard-up, both short and long term. Invariably the evidence showed that a very high proportion of people were actually very good at managing their money, they just didn’t have enough. Even where disadvantaged by lack of education, their experience and intelligence, as well as capacity for self-control and (ever) deferred rewards was what kept them together. The stereotypes applied to the marginalised were just that, smug self-serving rationalisations to boost weak, anxious, or just self-centered and greedy, egos. Improving the lot of those on low incomes, and certainly not adding roadblocks, is what good policy should be about. After all these people prove, day after day, they are very good at using and not wasting resources.
Thanks for writing this, Kristin. I totally agree. I’m also a welfare recipient and I rely on these services to afford large payments that I could not make out of one paycheck, but can manage if I can spread the cost out over multiple pay cycles. Compared to the debt spiral trap of credit cards and interest rates, which you can’t even get access to without a job anyway, these flat fee BNPL services were a game changer for me when they came along.
While there are definitely problems with the industry that should be addressed, when I hear politicians or advocacy groups saying these companies shouldn’t be allowed to lend to people in poverty, it’s infuriating. If I was barred from them my financial situation would immediately worsen, not improve.
And you’re right, if the welfare payment was set at a reasonable rate, I would almost never need these services. Somehow that idea never enters the discussion in Canberra.
Exactly. When I started studying accounting back in 2016 one of my teachers talked about BNPL and how it was irresponsible. I explained to him that actually for us and people like us it could be a lifeline for example I needed to buy the kids school uniform and books but we couldn’t afford the full upfront cost. Unlike layby with BNPL I could get the things we needed right now when we needed them but pay it off over a number of weeks. This also meant we weren’t strapped for cash to pay rent, buy food etc. People who have never experienced financial hardship have very little idea of what it’s like not to have enough money to pay for basic things you need to survive! I always counted ourselves very fortunate that we at least had something to eat even if it was porridge (which is what we practically lived off for a number of years) because I knew there were other people far worse off and you know porridge is not all that bad as a food.