A worrying trend towards buy now, pay later (BNPL) being used for essentials like groceries and fuel should be a “wake-up call” for the federal government as it mulls a crackdown, a leading advocate says.

Financial Counselling Australia (FCA) chief executive Fiona Guthrie says Australians are turning to BNPL for essentials as the cost-of-living crisis bites, with new figures revealing the grim shift.

A survey of 500 financial counsellors published on Thursday by FCA revealed 71 per cent have had clients who commonly use BNPL services to buy food.

“BNPL was never intended as a way to pay for everyday living expenses,” Ms Guthrie said.

“But the ease of accessing BNPL loans, combined with mounting cost-of-living pressures has meant more people are resorting to it just to get by.”

The FCA survey found Australians are using BNPL for a range of essential purchases.

About 40 per cent said their clients commonly use BNPL for fuel, while 32 per cent said clients are turning to the services for utility bills such as gas and electricity amid soaring prices.

Australians are suffering with double-digit price hikes on their utility bills this year, while petrol prices remain near multi-decade highs at around $2-a-litre in major capital cities like Sydney, Brisbane and Melbourne.

Ms Guthrie told The New Daily that the survey raises the stakes of an impending federal government crackdown on the industry, which advocates fear won’t go far enough to protect consumers.

The government has raised the possibility of introducing new rules that would effectively be a scaled-back version of responsible lending obligations, though consultations are still ongoing.

“This survey shows that if they don’t get this right then this product is going to harm more and more people.” Ms Guthrie said. “This survey just shows this is a problem we’ve got to fix.”

FCA says the new rules must, at a minimum, include income verification and an “appropriate credit check”, while larger BNPL providers should be brought under responsible lending laws.

Inadequate hardship support

Worryingly, the FCA survey on Thursday found even large BNPL providers still have inadequate hardship support available to customers struggling to pay their bills.

Asked to score BNPL out of 10 for hardship support, Afterpay only scored 5.8, while Zip managed just 5.1.

Humm scored 4.6, while Klarna was rated 4.2 – the lowest of large BNPL providers surveyed.

Ms Guthrie said there had been “no improvement” on hardship options from last year’s survey.

“It’s really disappointing,” she said.

“Financial counsellors continue to say that, firstly, they’re just really hard to contact, you can’t pick up the phone.

“Secondly, they just don’t provide appropriate arrangements for people.”

Under responsible lending obligations large banks are required to meet specific requirements for hardship support, Ms Guthrie said.

But BNPL companies aren’t required to abide by such rules and instead are governed by a much less strict voluntary code of conduct that was developed by the industry.