Sydney single mother Shonda* says it was her domestically abusive partner who first got her to sign up to buy now, pay later accounts.

"I applied and they just approved. That happened again and again – with Afterpay, Zip Pay, Bundll, all of them," she tells CHOICE.

At one point in time, Shonda says she was in debt to 12 buy now, pay later companies and owed around $7000.  

"Financially, he tried to control me – he would control my bank account, I wouldn't be able to pay my debts back because he financially controlled all the money I was getting in. I wasn't able to pay my debts and they would go to debt collectors. I was dealing with domestic violence, two children and all this debt," she says.

Financial counsellors and domestic violence workers who spoke to CHOICE say stories like Shonda's, where buy now, pay later is being used as a tool of family violence and economic abuse are becoming increasingly common.

It's not uncommon for us to see victim survivors of family violence and economic abuse present each week with buy now, pay later debts and issues

WEstjustice program manager Dacia Abela

"Doing this work 24 months ago, buy now, pay later was barely an issue," says Dacia Abela, program manager at WEstjustice's Economic Justice Program.

"Now it's not uncommon for us to see victim survivors of family violence and economic abuse present each week with buy now, pay later debts and issues. Some of which will be debts incurred in their name by their ex-partners, and some are applications made by the victim-survivor themselves because they have otherwise been left in poverty after leaving the violent relationship."

Opportunity for fraud

Julia Davis, senior policy and communications officer at the Financial Rights Legal Centre says her practice has similarly seen an influx in BNPL debts racked up by abusive partners in the victim's name.

"Because these companies have made a frictionless sign-up process, it's pretty vulnerable to fraudulent use by perpetrators [of family violence]," she says.

Jasmine Opdam from Redfern Legal Centre's Financial Abuse Service agrees, saying in many cases the victims of the abuse don't even know they have got buy now, pay later debts in their name.

Because these companies have made a frictionless sign-up process, it's pretty vulnerable to fraudulent use by perpetrators

Julia Davis, Financial Rights Legal Centre

"In identity theft or fraud circumstances, the victim survivor typically has no idea that they even have buy now, pay later accounts open in their name until they are being pursued, either by the provider or by a debt collector, for the debt," she says.

BNPL companies ill-equipped for family violence cases

When financial counsellors or family violence support workers try to access relief such as debt waivers for victims of financial abuse, they say they get a patchwork of varying responses from BNPL companies.

Jackie Smith, a specialist domestic and family violence financial counsellor at the Brisbane-based Micah Projects, says there are times when BNPL companies have simply ignored her emails and attempts to contact them about waiving debts for victims of family violence.

The response from BNPL providers was, on the whole, far inferior to that of the major banks

She says at other times she has had a positive response from companies, but they have been inconsistent. "It's not good enough," she says.

The financial counsellors and other frontline workers we spoke to for this story all told us that the response from BNPL providers was, on the whole, far inferior to that of the major banks, who all have specialist teams of highly trained staff to work on family violence cases.

"BNPL [providers] just don't have the staff trained in trauma-informed responses on how to deal with this stuff," Davis says.

Not best practice

Opdam says in her practice she has seen a wide range of BNPL providers request that victims provide a police report about any economic abuse before providing a debt waiver.

She says this isn't considered best practice, as police are usually unwilling to take reports in cases where only small amounts are the focus of the financial abuse and it also forces victims to relive abuse for the sake of gaining a piece of paper.

Again, she contrasts this to the banks, who understand police reports may be retraumatising or unobtainable for victims.

BNPL providers are not regulated under the National Credit Code as other financial institutional lenders are

She says working with BNPL companies on these issues is often an "educative piece" with customer service representatives needing to be told what is best practice. 

Industry code lacks specific guidance

BNPL providers are not regulated under the National Credit Code as other financial institutional lenders are. They do, however, have their own voluntary industry code of practice which major players in the industry have signed up for.

The code of practice, available on the Australian Finance Industry Association (AFIA) website, makes two very brief mentions of family violence and provides no specific guidance on how companies should address these cases. This is in contrast to the Australian Banking Association which has a 10-page guide on its website on how banks should operate with victims of abuse (including not requesting police reports).

The code of practice makes two very brief mentions of family violence and provides no specific guidance on how companies should address these cases

AFIA tells CHOICE that BNPL companies understand the complex issues of people who are experiencing abuse.

"BNPL providers understand domestic violence is a serious community issue and they take their role in helping vulnerable consumers, especially those who are victims of domestic or family violence, very seriously," a spokesperson says.

Afterpay tells CHOICE the company prioritises servicing of interactions with vulnerable customers including those in domestic violence. 

"For customers who find themselves in financial trouble, Afterpay offers a generous and accessible hardship program where flexible payment timelines with no additional fees or cost can be agreed upon. Afterpay has never enforced a debt nor does it sell debts to collection agencies," the platform says.

Zip Pay responds

Zip Pay says it has worked closely with Good Shepherd to "improve and redraft our existing Family Domestic Violence Policy for customers that might face hardship as well as ensuring our staff are adequately trained to handle these matters", adding, "Our CX [customer experience] and Collections Leaders as well as the entire Financial Hardship team completed a two-day training with Good Shepherd. Training and refreshers are conducted annually."

Responsible lending laws provide safeguard 

CHOICE head of policy and government relations Patrick Veyret says that the federal government's move to regulate BNPL providers was a welcome step and that responsible lending laws played an important role in raising "red flags" around economic abuse. 

"Responsible lending laws are an important safeguard to prevent economic abuse as they require lenders to make reasonable inquiries into a consumer's financial situation, as well as inquire into the objectives and suitability of the loan. These protections help to identify any red flags in the loan application. It is critical that buy now, pay later products are subject to these important protections in responsible lending laws," he says. 

Better regulation would protect women against abusive and coercive BNPL debts

Good Shepherd financial counsellor Holley Dumble

Good Shepherd family violence financial counsellor Holley Dumble agrees that better regulation would lead to a more consistent approach from the industry that supports victim-survivors of family violence.

"Better regulation would protect women against abusive and coercive BNPL debts – for example accounts fraudulently set up in their name by abusers – and mandate consistent hardship and family violence support by all BNPL providers," she says.

BNPL bans may stop people coming forward 

Davis and others say that when debt waivers are sought for victims of family violence, companies like Afterpay will ban the customer from their platform after agreeing to waive the debt.

She thinks this is unfair and may act as a disincentive for women to come forward and seek help for illegitimate debts.

"The only solution the buy now, pay later companies have come up with to prevent ongoing abuse and fraud is 'okay, well, we'll just blacklist you then'. For women who rely on these products, that's not exactly fair," she says.

Risk of ban may act as a disincentive for women to come forward and seek help for illegitimate debts

Afterpay confirmed to CHOICE that those who seek debt waivers are not able to use the platform again in the future.

"Once a partial or full waiver is processed for a customer, the account is 'closed' and the customer is no longer eligible to hold an Afterpay account to limit exposure to further potential financial difficulty," a company spokesperson says.  

"On occasion we may receive a request from the customer or third party for the customer to have continued use of Afterpay. We review each request for reinstatement by a specialist team on a case-by-case basis," they add.

While some victims may not want to be cut off from the companies, for Shonda, who has now been banned from many platforms after getting her debts waived, it comes as a relief. She had 10 of her 12 BNPL debts waived with the help of a financial counsellor.

"I know I will never be so trapped again, I will never have to worry about being in all that debt again," she says.

*not her real name.

Stock images: Getty, unless otherwise stated.

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