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Buy now, pay later services (including Afterpay, Humm, Zip, Klarna, Openpay)

This fact sheet is for information only. You should get legal advice about your situation.


Ursula used a ‘buy now, pay later’ (BNPL) service to buy several items before Christmas, while she was on Centrelink payments. Soon she was struggling to meet the payments.

After Christmas Ursula saw she owed $550 to several different retailers after using BNPL and had already missed two or three $20 payments to some retailers, and some $50 payments to others. She thought some late fees were added but was not sure.

The BNPL service then locked Ursula out of her account, so she was unable to check what was owed. Ursula’s only form of income was Centrelink, she was already paying back a $400 loan to Centrelink, and she and her partner both had other loans and bills. When she applied for hardship through the BNPL service she was told they would charge no further late fees and that her account would be put on hold.

Ursula’s BNPL debt was passed to debt collectors, who continued to add fees The debt collectors eventually told her she owed $1,323.42. This was much more than the $550 she spent, and included significant late fees added after Ursula was assured that there would be no more late fees.


BNPL services market themselves as a quick and easy way to get what you want now, and pay them off later, in instalments (a bit like lay-by but you get the goods right now).  . There are a number of BNPL services in the market, for example, Afterpay, Humm, Klarna, Zip Pay with many more emerging.

Because they do not charge interest or fees, they do not have to follow the same laws as companies who provide other forms of credit like credit cards. The bottom line with BNPL services is that anything that sounds ‘too good to be true’ needs to be treated with plenty of caution.

Instead of charging interest, BNPL services may charge:

  1. the shop a fee for using their service and/or
  2. You may be charged late fees if you don’t pay your instalments on time.

Using a BNPL service can be cheaper than a credit card or other form of credit. It might also be available to people who can’t access regular credit like a loan or credit card.

Still, BNPL is debt that needs to be paid and can be a problem if you cannot afford it in the first place. If you cannot afford it, it can leave you with late fees and trying to work out what debts you owe who (if you have taken out loans with multiple companies).

BNPL can affect your credit report, depending on the lender.  Applying for BNPL may show up as an enquiry listing on your credit report.  Repayment history information may be reported.  You might even end up with a default on your credit report .  These can all affect your credit rating.


  • What other debts do I already have?
  • How many payments do I need to make and how much is each payment?
  • Does the BNPL repayment date line up with my payday? Do I expect to pay on time?
  • What other repayments do I need to make with my pay, including other BNPL payments?
  • Are there hidden costs, including if I cannot afford a payment?
  • What happens to my personal information (data) and what goes onto my credit report?
  • What if I return the goods?
  • What if I want to complain?
  • Is the BNPL service a member of the BNPL code of practice?
  • Are you paying more because you are using a BNPL service? Shop around


Unlike most consumer lenders, BNPL services are not legally required to check if you can afford the repayments and are not regulated under the National Consumer Credit Protection (NCCP) Act 2009. This means you need to check for yourself if you can meet the payments. Make sure you will have enough money left on each pay day to meet this instalment plus all your other commitments. If you have other debts, make sure this won’t be the straw that breaks the camel’s back.

Some BNPL services have made public commitments under the BNPL Code of Practice (see below), in limited circumstances, to assess your income against your expenses before they can approve your profile or transaction. However, how they check this is not transparent and you could still end up spending more than you can afford.

BNPL can let you take a much needed item home straight away, but you should be careful about making impulse purchases without having a clear plan for paying the debt back.


With few checks conducted by the BNPL service, it is easy to fall into a debt trap if you don’t have the money to pay the next instalment. People often default when the payment instalment date is due just before pay day and they have no money left in their account. You will then incur other charges like late fees charged by the BNPL service and dishonour fees charged by your bank. This can have a ‘domino effect’, making it harder to pay your other debts. This is how a debt spiral takes hold.

Some people also obtain multiple BNPL accounts -this  can really get you into difficulty. Also, paying your instalments with your credit card instead of a debit/savings account, means you will incur credit card interest and charges too.

Defaulting on BNPL services may affect your credit rating. Many BNPL schemes include in their contracts that they can list on your credit file, which can make it difficult to get credit from other lenders.

Unexpected things happen: you might lose your job, get sick, or your car could break down. Other lenders are required by law to help by varying your credit contract if you are in hardship, including letting you miss a payment, or pay less without penalty.  There is a voluntary BNPL Code that gives some hardship rights and you should check if your provider is signed up to that Code (see further below).

Otherwise the BNPL service might continue to charge late fees, or send your account to a debt collector even if you’ve asked for more time for a good reason.


Vendors who are charged fees for BNPL services can add this cost to their overhead expenses (like rent, electricity or supply costs) and this can increase the prices of items they sell. This means that all customers are probably paying the costs of making BNPL services available, whether or not they are using them.

In some cases the costs of the actual items purchased by BNPL are clearly inflated. Always ask about the cash price of any items before agreeing to any BNPL arrangement. Check with other retailers to make sure you are not actually paying interest hidden in the costs of the goods.


Personal information (like your name, date of birth, contact number etc.) you give to BNPL services is stored with them, along with a record of your purchases, and is very valuable to other businesses and for the BNPL service’s own marketing. BNPL services might be entitled to sell your personal information to other businesses, and to market directly to you, under the terms of use you sign to use the service.

Some consumers who have spoken with us report getting a lot of spam and phone calls from other businesses right after they sign up with BNPL services.


If the trader does not process the return to the BNPL service, you may find yourself caught in the middle if this does not happen and the BNPL continues to pursue you for instalments to pay for goods you no longer have.


If you have a problem with the service, complain directly to the company. If this does not work, you may have other options. BNPL services are not required to be members of the Australian Financial Complaints Authority (AFCA), although some of them may have joined voluntarily. You can find out if they are a member by using the Find a Financial Firm search function on the AFCA website. If they are a member you can lodge a complaint online for free.

If the service is not a member of AFCA, you can complain to the Australian Securities and Investments Commission (, or for problems involving faulty or returned goods, talk to NSW Fair Trading (


The BNPL Code of Practice is a voluntary code that applies from 1 March 2021 onwards.

Most of the big BNPL providers:

  1. have signed onto the Code. You can check which companies have signed on here:; and
  2. are members of the Australian Financial Complaints Authority (AFCA, – a free and independent consumer complaints body you can go to if you have a dispute with the BNPL provider.   AFCA can consider breaches of the law, the Code and best business practices generally.  We have more information about lodging in AFCA in our factsheet here:

A copy of the Code is available on the AFIA website:

Under this Code, you have some protections:

  1. Members will act fairly, honestly, ethically and treat you reasonably
  2. BNPL services will not be used for unsolicited sales (such as door to door sales)
  3. Members will provide clear information about when your payments are deducted and all fees chargeable
  4. If you miss a payment, you will be contacted before they charge late fees
  5. Late fees will be fair, reasonable and capped
  6. You will have a right to all documents about your profile and transactions
  7. Members will assess whether you are suitable for BNPL profile and the transaction (although the Code doesn’t say how they think you will be suitable)
  8. You have a right to request financial hardship assistance. While the BNPL service is considering how to respond to your request, your account must be put on hold, late fees frozen and no default listing can be listed on your credit file.  The BNPL service must respond within 21 days of your request (or if they asked you for more information to consider, then 21 days after you have provided that information).  
  9. Your debt will not be sold to a debt collector if you are in a financial hardship arrangement.
  10. BNPL services cannot commence bankruptcy proceedings against you

If the member has breached these protections or has not acted fairly, then you should get legal advice by calling our Legal Advice Line on 1800 844 949.

If you are having difficulty meeting your instalment payments, you can get advice from a free financial counsellor by calling the National Debt Helpline on 1800 007 007.


  • Is the BNPL service a code compliant member of the AFIA Code and a member of AFCA?
  • What does the BNPL service’s privacy policy say?
  • How sure are you that you will be able to make the payments required?
  • How much are the fees if you miss repayments?
  • When are the payments deducted from your account? Line up your purchases with your pay day.
  • Are you being charged extra for the items? Shop around and check there are no hidden fees and charges built into the price.

Last updated September 2021