"They felt that they had 'failed' by getting into what they viewed as bad debt rather than 'investing' in things like education," Dr Julia Cook from the University of Newcastle said about her research on young people with BNPL debt.

"The psychological, emotional, and even physical impact of being in debt was quite notable, and due to the stigma it can be quite difficult for young people to seek help/support."

Matthew McCabe from Newcastle Advisors said most clients he sees with buy now pay later (BNPL) debt are between 24 and 30 years old.

"In addition, many people we have seen take up this service are in casual, part time work, or unemployed. Which raises concerns as a financial planner."

There needs to be more education around these types of services according to Mr McCabe. He said young people getting into BNPL don't fully understand the impact on future borrowing capacity.

"Ultimately, by using a BNPL service, you are signalling to the bank/lender that you are not good at managing your money," he said.

"Missed payments to BNPL can be classed as negative activity. This may be reported to credit bodies and listed on your file."

In a survey conducted between August and September 2021, Financial Counselling Australia (FCA) said that 84 per cent of the 248 financial counsellors surveyed had at least half their clients with BNPL debt. This was up from 31 per cent reported the previous year.

Mr McCabe said leading providers in Newcastle are "AfterPay, ZIP and Klarna".

"BNPL providers tend to give an on-the-spot loan to a customer to make a purchase, who then repays it in instalments," he said.

"This finance method can be more expensive than alternatives and can encourage irresponsible spending."

St Vincent de Paul Society's Rhiannon Cook sees a "strong relationship" between income and debt.

"When people were on a higher rate of JobSeeker during COVID many used this as an opportunity to pay down their debt, but when people don't have enough to afford the basics, they often have no choice but to enter into arrangements that aren't sustainable in the long-term," Ms Cook said.

The FCA survey states that 61 per cent of counsellors interviewed said clients with BNPL debt were "struggling to pay other living expenses".

"Many clients are prioritising BNPL repayments over other essential expenses, like food and rent, to keep their BNPL accounts open," the report reads.

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Mr McCabe said he sees several clients "in a bit of trouble" with BNPL debt who are now unemployed due to COVID.

"We have seen one or two occasions where credit card debt and personal loan debt were taken out to pay for BNPL - which then resulted in this individual obtaining additional BNPL debt which had the house of cards come crashing down on them," he said.

The FCA survey also found that 95 per cent of counsellors said "BNPL debt should be covered by the National Credit Code".

However, introducing regulation for these providers would be difficult according to Mr McCabe. He said due to services charging fixed fees, rather than interest on a loan, they "do not need to meet responsible lending requirements."

Dr Julia Cook said while the BNPL industry has recently developed it's own Code of Practice in an attempt at self-regulation, her report made some key recommendations for further guidelines.

"Reviewing the way that BNPL services are marketed and presented, and attending to the fact that some consumers are using multiple BNPL services at the same time, or are using them in conjunction with credit sources such as credit cards and payday loans," she said.

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