BNPL Debt in Australia – Why It’s Growing and How to Regain Control

Many Australians have come to rely on Buy Now Pay Later (BNPL) services like Afterpay, Zip, Klarna and Humm. BNPL allows us to split purchases into interest‑free instalments, but that convenience can quickly become a debt trap. With cost‑of‑living pressures rising across cities such as Sydney, Melbourne, Brisbane, Perth and other major centres, more households are using multiple BNPL accounts to juggle everyday expenses. A 2022 survey by the Good Shepherd found that 84% of financial practitioners reported clients trying to manage their debt by opening additional BNPL accounts, leading to unmanageable debt spirals. Understanding how BNPL works, the recent regulatory changes and your options for managing BNPL debt can help you regain control.

The Rise of BNPL in Australia

BNPL has transformed shopping habits. Providers like Afterpay, Zip and Klarna allow customers to split a purchase into four fortnightly repayments without interest. According to the Australian government, the BNPL sector supports more than 120,000 local jobs and contributes up to $18.4 billion to GDP. However, the same report noted that many BNPL products were not subject to the National Consumer Credit Protection Act, meaning there were no mandatory affordability checks before June 2025.

Without proper checks, BNPL usage ballooned. Financial counsellors observed that clients often held multiple accounts, which made it easy to lose track of repayments. In 2025 the federal government introduced new consumer protection legislation to bring BNPL under the credit laws. From 10 June 2025, BNPL providers must hold an Australian credit licence, conduct suitability assessments and offer the same protections as other forms of credit. This marks a significant shift: BNPL lenders now need to consider whether the product is suitable and affordable for you and must provide hardship and dispute‑resolution processes.

How BNPL Works – And Why It Leads to Debt

BNPL seems simple: you buy an item and pay it off over four instalments. Most platforms charge no interest if payments are on time. But there are hidden traps:

• Late fees can be significant: Under Afterpay’s terms, orders above $40 attract an initial $10 late fee, plus an extra $7 if unpaid after seven days, capped at 25% of the purchase price or $68. Orders under $40 attract one late fee of up to 25%. Zip Pay charges a monthly fee and late fees if you miss the due date.
• Accounts are frozen when you miss a payment: If you miss a payment, Afterpay immediately pauses your account and you cannot make new purchases until payments are up to date.
• Multiple accounts multiply risk: Because it’s easy to sign up, many consumers use several BNPL providers. Financial practitioners report clients using new accounts to cover existing BNPL debt, leading to a debt spiral.
• Temptation to spend more: BNPL encourages impulse buying. The National Debt Helpline notes that the convenience of BNPL makes it easy to spend more than you can afford.

New Regulation: BNPL Is Now Credit

The Treasury’s June 2025 reforms classify BNPL as “low‑cocst credit,” meaning providers must:

• Hold an Australian credit licence.
• Conduct suitability and affordability assessments before approving accounts.
• Comply with responsible‑lending obligations and respond to hardship requests.
• Offer dispute resolution via the Australian Financial Complaints Authority.

The reforms recognise that BNPL “looks and acts like credit,” so it should be regulated as credit. BNPL providers must now check your financial circumstances, verify your income and ensure the product is not unsuitable. The industry also faces upcoming Consumer Data Right (CDR) obligations in mid‑2026, which will require sharing data with accredited third parties.

Does BNPL Affect Your Credit Score?

Yes – under the new rules. Previously, BNPL services rarely appeared on credit files. Now:

• Credit checks: Since 10 June 2025, BNPL providers conduct credit checks that may appear on your file. Some providers perform only “soft” inquiries, but multiple applications across different providers can compound.
• Reporting of missed payments: Afterpay’s credit‑reporting policy states that it collects credit-related information and may disclose default information to credit bureaus if a payment is overdue for 60 days or more. Serious infringements may also be reported.
• BNPL and defaults: According to the Moneysmart guide, defaults of $150 or more that remain unpaid for 60 days stay on your credit report for five years, even after you pay the debt.

Therefore, missing BNPL repayments can affect your ability to access car loans, personal loans or mortgages in future.

Why BNPL Debt Grows Quickly

1. No upfront affordability checks (until 2025)

Before the new legislation, there were no mandatory checks to determine if you could afford the repayments. Many customers took on more instalments than they could repay.

2. Multiple accounts and “debt stacking”

Clients often open multiple BNPL accounts to meet repayments on existing ones. The Good Shepherd survey of financial counsellors found this to be a major driver of BNPL debt.

3. Tempting marketing and fees

BNPL services market themselves as interest‑free, but late fees accumulate quickly. As soon as you miss a payment, fees begin and your account is paused.

4. Cost‑of‑living pressures

Higher living costs in cities like Sydney, Melbourne, Brisbane and Perth mean more people use BNPL to manage day‑to‑day expenses. Rising energy and grocery prices push households to look for short-term credit.

5. Lack of budgeting

Many users don’t track all their BNPL commitments. The National Debt Helpline warns that BNPL’s convenience makes it easy to overspend and lose track of payments.

Steps to Manage BNPL Debt

The National Debt Helpline provides clear steps if you’re struggling with BNPL repayments:

1. Work out what you can afford: Create a simple budget. If you can’t pay anything, consider cancelling direct debits to prioritise essentials like rent.
2. Get organised before contacting your BNPL provider: Gather information about your income, expenses and hardship reasons. BNPL lenders often have a hardship form on their website.
3. Contact your BNPL provider: Explain your situation and ask them to pause payments while assessing your hardship. Providers may reduce or pause repayments, stop charging fees or even waive debt in extreme hardship.
4. Keep records: Document all communications, including dates, names and what was discussed.
5. Know your rights: BNPL lenders must acknowledge hardship requests within one business day and respond within 21 days. They must put your account on hold during the assessment and cannot sell the debt to a collector at that time.
6. Escalate if necessary: If the lender rejects your proposal or doesn’t respond, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA).
7. Deactivate extra accounts and reduce limits: Consider using only one BNPL account at a time and deactivating or reducing limits on others. Ask the provider to block future purchases until you clear the debt.
8. Seek free financial counselling: Call the National Debt Helpline on 1800 007 007 for confidential advice.

Utility Bill Debt Solutions

BNPL is sometimes used to pay utility bills, but there are safer options. Energy, water and telecommunications providers in every state offer hardship programs. If you’re behind on utility bills:

• Contact your provider; they must offer payment plans and may waive late fees.
• Check for state‑based concessions and energy rebates.
• Avoid using BNPL to pay utilities; late fees can compound.
• Call the National Debt Helpline or a financial counsellor to explore utility bill support.

When BNPL Debt Is Part of a Larger Debt Problem

If BNPL debt forms part of broader financial stress—multiple credit cards, payday loans, or personal loans—you may need a more structured solution. Formal options like a Part IX Debt Agreement can:

• Consolidate unsecured debts into one affordable weekly repayment.
• Freeze interest and fees on included debts.
• Provide legal protection from creditors; once the agreement is accepted, you pay an agreed percentage and the rest is wiped on completion.
• Stop garnishee orders or collection actions.

Debt agreements have eligibility limits on income, divisible property and debt and appear on your credit report for at least five years. They are not loans but formal insolvency arrangements regulated by AFSA.

Always seek independent advice from a licensed debt advisor or financial counsellor before entering a formal solution.

Frequently Asked Questions