Tasmanians struggling with cost of living increases are increasingly using 'buy now, pay later' services for essentials like food and groceries.
Anglicare Tasmania has released research, based on a survey of its financial counsellors, that found the use of 'buy now, pay later' or BNPL services, has skyrocketed over the past year.
Dr Alexander King, from Anglicare's Social Action and Research Centre, said the average debt was $2,200 and 70 per cent of those struggling to repay it were female.
"Buy now, pay later debts are more common than a year ago and many people are struggling to repay them," she said.
"[They] add another layer of complexity and difficulty to an already complex picture of indebtedness."
BNPL services allow people to buy something immediately and pay for it in instalments.
Providers like Afterpay, Zip Pay and Klarna appeal to consumers because, unlike credit cards, there are no interest payments.
But if a repayment is missed or late, the fees are significant and can come directly out of the person's bank account.
"Twelve months ago it was rare to have someone with a BNPL debt," Dr King said.
"There has been a proliferation of companies since then. Most days, I come across one I have not heard of before."
Young women, family violence survivors most likely to struggle
The report, entitled 'Buy Now, Struggle Later', found financial counselling clients with BNPL debts were more likely to be women under the age of 25.
About 20 per cent were victim survivors of family violence.
"The research showed that all of the clients with BNPL debts were experiencing at least one kind of social disadvantage," Dr King said.
"This includes people who reported being affected by mental illness or having a psychiatric disability."
The most common items purchased were food and groceries.
Utilities generally can't be paid for using BNPL services but Dr King said "increasingly, BNPL is being used to pay for essentials where they can".
"I had a client tell me he can't afford to do a food shop so he gets gift cards and can do a fortnightly shop and pay it back over four fortnightly payments," she said.
"When it first started, people were using it for non-essential clothing and furniture but there has been a big shift."
Financial Counselling Australia CEO Fiona Guthrie said counsellors often dealt with people with multiple accounts and multiple repayments coming out of their bank accounts at different times.
"These findings back what is happening nationwide — soaring numbers of people resorting to BNPL just to get by and consequently, soaring numbers of people dealing with BNPL debts," she said.
"Some people find themselves in a debt spiral."
Anglicare wants the federal government to increase income support payments so people don't have to rely on BNPL services.
It also wants 'buy now, pay later' products regulated under the National Consumer Credit Protection Act 2009, as proposed in a Treasury consultation paper.
In a submission to the Treasury consultation process in 2022, a group of 22 not-for-profit groups, including Anglicare Australia, said: "BNPL is a credit product and should be regulated in the same way as other credit products, including credit cards and personal loans".
