You know someone using Afterpay to buy groceries. Fuel. The internet bill. Buy now, pay later sounded like a lifeline when prices spiralled out of control. For millions of Australians, it became a debt trap.
The numbers are stark. One in three people visiting a financial counsellor has BNPL debt, according to Financial Rights Legal Centre. Many have multiple accounts open simultaneously. And critically, 19 per cent of BNPL users cut back or went without essentials to make their payments on time. That means skipping meals, postponing medical visits, or rationing fuel to service debt for purchases they couldn't afford upfront.
Why did BNPL explode during Australia's inflation crisis? Simple logic: no credit checks, no interest, instant approval. As household financial stress hit 77 per cent in late 2025, BNPL providers offered a payment method for necessities without the wait. The market swelled 17.5 per cent annually, reaching $18.34 billion in 2026. For people earning wages that hadn't kept pace with rising prices, it felt like the only option available.
But that relief came at a cost. Zip's bad debts quadrupled. Afterpay's expected credit losses jumped 50 per cent. When customers couldn't pay, the damage cut deep: a single Afterpay default can drop your credit score by 50 to 100+ points, making future mortgages, car loans, and even rental applications far more expensive or impossible to obtain. Meanwhile, nearly four in ten BNPL users missed at least one payment, signalling widespread financial strain.
The reason this happened was simple: BNPL providers didn't have to check whether customers could actually afford their purchases. They just approved everyone. Younger, lower-income, and vulnerable Australians were hit hardest, lacking safety nets when BNPL balances mounted.
The regulatory response came in June 2025, nine months ago. The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 brought BNPL under the National Consumer Credit Protection Act for the first time. ASIC now requires providers to conduct affordability checks, assess whether customers can sustain repayments, and offer hardship assistance. Fee caps were introduced. BNPL providers became AFCA members, giving complaints a resolution pathway.
The problem is timing. These rules protect future users but do nothing for millions already buried in BNPL debt. The ACCC is investigating whether merchants and BNPL providers deliberately pushed vulnerable consumers into unaffordable debt through unsolicited selling tactics. Early findings suggest widespread concerns.
For households already in BNPL debt, the new rules mean providers must now listen to hardship requests and work toward solutions. For those considering BNPL, the message is clear: deferred payments don't make purchases more affordable. They just delay the financial stress until later.