The Australian Government recently announced reforms to 'buy now, pay later' (BNPL) schemes, to better protect consumers from bad lending practices.

Under the new regulations, providers of BNPL schemes will need to hold a credit licence, abide by certain advertising restrictions and adhere to minimum standards and hardship requirements.

Commissioner for Consumer Affairs in South Australia Dini Soulio said the schemes - which spread the purchase cost of an item into smaller amounts to paid off over a short period of time - can be risky.

“It’s easy to understand why buy now pay later schemes can seem like a practical option for many households – especially for those who might be struggling to make purchases in one payment,” Mr Soulio said.

“But they can also come with risks – especially for those consumers who are already struggling."

He said increasing the level of regulation would better help protect vulnerable consumers from bad lending practices.

“It will also ensure anyone signing up to one of these agreements has a greater understanding of what they’re getting into, as well as what the conditions and requirements for repayments are,” Mr Soulio said.

Dr Ros Russell, Director Research, Advocacy and System Impact at Good Shepherd, said the organisation - which supports women, girls and families experiencing hardship - welcomed the commitment to regulating BNPL schemes.

"This will work towards protecting people, particularly women, from coercive, fraudulent and unaffordable debt all over Australia," Dr Russell said.

"Failure to make repayments on time can also be permanently recorded on your credit rating, so it is important to avoid the debt spiral and make repayments on time."

Dr Russell encouraged people to consider alternative services available for financial help.

"People can get in touch with energy and water providers, and their local council, to arrange installment payments and reduced payments (for utilities) if they’re finding things tough," she said.

"There are also a range of community-based services that provide people with free support, such as food hampers, supermarket vouchers, school uniforms and student electronic devices.

"While reaching out for support can feel difficult, particularly for people who haven’t done it before, these services are here to help, and understand that a lot of people are doing it tough at the moment."

With support from the South Australian Government, Good Shepherd offers no interest loans in South Australia in partnership with NAB. These can be used to purchase essential goods and services, up to the value of $2000, and for bond, rent-in-advance or moving expenses up to $3000.

The loans are free from fees, charges and interest, so loan recipients repay only what they borrow. More information is available from Good Shepherd.

Good Shepherd also runs Good Money store - a not-for-profit community service offering financial support via a network of workers and counsellors who can help with managing finances as well as applying for no interest loans. For more information visit goodshep.org.au/services/good-money-stores/, phone 1300 770 550 or email salisbury@goodmoney.com.au.

The new laws are expected to be introduced into Parliament by the end of this year.

The South Australian Government funds a range of services available in South Australia to help people in personal financial difficulty to address their financial problems.

Visit the Department of Human Services or sa.gov.au to learn more.