When financial counsellor Travis Petrovic meets a new family, one question is front of mind: Are they using a pay later service?

Invariably, the answer is yes – and their accumulated debt may be nudging tens of thousands.

As the lure of buy now, pay later products continues to explode, so too does the toll on families engaged with Centacare due to child safety and wellbeing concerns.

Travis joined the multidisciplinary RESTORE Intensive Family Services North team four months ago and works with families to boost financial literacy and “untangle the mess’’ left by the pay later trend.

“In the last 18 months, it has gone gangbusters,’’ he said.

“It’s a really sad cycle because everyone wants everything yesterday and why wait? But suddenly a family could have five, six pay later debts and what they thought was manageable becomes completely out of control.’’

That’s when families start to cut corners and scrimp on the basics of life, says Travis, noting that food and utilities are often among the first necessities to go.  He is currently working with 17 of the 38 families engaged with RESTORE.

“I’ve found many of the same people using pay later services also utilise payment advances from Centrelink which can create a double-whammy to their fortnightly budget,’’ he said.

Recently, he worked with a client with a $40,000 non-secured debt – a mix of credit, from ride sharing services to personal loans.

“The family’s credit rating was poor and I advocated on their behalf to have electricity and gas connected for the safety of their infant daughter,’’ Travis said.

“People’s livelihoods have been affected by COVID-19 and subsistence is one of their major problems. They are simply just surviving, so when people offer them these deals, they take them.”

Industry data shows the average purchase made on pay later platforms is about $200.

“This may not read like a huge debt, but when a family has no money remaining at the end of a fortnight, finding enough for repayments can be very hard,’’ Travis said.

Australian Financial Review statistics show that one in five people are missing their scheduled payments, with 25 per cent of all pay later revenue derived from late payment fees and charges. These can cost the borrower up to one quarter of the purchase price every time they skip a payment.

“Some merchants state that once you miss a payment, you can no longer use their service until you catch up with your payments,’’ Travis said.

“The problem is there are no checks in place to prevent debts accruing with multiple pay later merchants after the first upfront payment is made, so, essentially, no one knows how much one person has with each pay later merchant.

“One merchant will lend up to $20,000 for all manner of things from dental work to home repairs. You cannot do the same with a No Interest Loan Scheme (NILS) or a StepUP loan – affordable small loans for people living on low incomes.’’

In National Child Protection Week, Travis is urging families to reach out to a financial counsellor for help if they are struggling to manage their money.

“Intergenerational issues such as poor financial literacy increase a family’s risk of winding up in a situation where they’ve got huge amounts of debt through credit, not realizing the ramifications and what it can mean long-term because those things aren’t esplained,” he said.

“That’s where financial advocates and counsellors can come in and teach people about the right ways of doing things.’’