HOSTING the picture-perfect Christmas is a costly endeavour and the temptation to “buy now and pay later” hides a threatening debt-trap for low-income families, a Catholic peak body warns.
Catholic Social Services Australia chair Francis Sullivan said low-income families using companies like Afterpay, Zip Pay, Latitude and Sezzle, could lead to major debt problems in the New Year.
“Everyone deserves to celebrate Christmas but for low-income families this can look very different to the more affluent in our communities,” Mr Sullivan said.
“The facts are that using BNPL companies to buy presents, food and other Christmas related goods can often lead to a debt spiral that many low-income families struggle to get out of.”
In its annual survey, Financial Counselling Australia found a sharp increase over the past year in people with “buy now pay later” debt seeking help from financial counsellors.
The survey found 84 per cent of financial counsellors reported about half, most or all clients had “buy now pay later” debt at the time of the survey. This compared to 31 per cent just a year ago.
Of those surveyed, 61 per cent said most or all clients with “buy now pay later” debt were struggling to pay other living expenses.
Mr Sullivan said many of these “buy now pay later” products are piling debt onto of credit cards, personal loans, and often utility bills or rent.
It becomes a difficult situation that only gets worse as late fee payments back up.
“All these companies have hardship programs to help including repayment plans but they often fall well short,” he said.
“Regulations around BNPL products are at best slack with these companies operating under a voluntary industry code of practice.
“There needs to be major reform and safeguards to protect low-income earners.
“No one should be denied a happy and festive Christmas but as we see all year round, there are always going to be some people that fall through the cracks.”
