Act now to avoid pain later on Buy Now Pay Later services
Buy Now Pay Later (BNPL) lenders such as Afterpay, ZipPay and Payright must be regulated by the same consumer protection laws as other credit providers, Federal Member for Mayo Rebekha Sharkie has told Federal Parliament.
In a motion late yesterday responding to an ASIC report on the BNPL industry, Rebekha said the number of Australians using BNPL services had nearly doubled in the past 12 months and yet there was no regulatory framework to make sure they could afford it, and no protections if they couldn’t.
“The social and economic impact from Australians caught in the debt cycle thanks to Buy Now Pay Later lenders such as Afterpay, ZipPay, Openpay, Payright and BrightePay is going to be enormous,” Rebekha said.
“The Buy Now Pay Later industry is a financial tsunami waiting to happen.
“ASIC found that one in five consumers using Afterpay receiving late fees in the last 12 months, resulting in over $43 million in late fees for the 2018-2019 financial year.
“Most people who missed a payment had been using multiple BNPL services in the previous six months and nearly 40 per cent also had a payday loan.
“These lenders are not bound by responsible lending obligations, but they should be.
“This sector is not subject to the National Consumer Credit Protection Act because the credit terms are short and no interest is charged.
“However, that doesn’t stop late fees and when they need to take out a loan to pay those late fees, where do they go? They go to get a small loan credit contract, and then they pay up to a 200 per cent increase.
“These credit providers told ASIC that no more than one per cent of their customers had been in financial hardship during COVID-19, but that is clearly not borne out by the facts in this report.
“We are failing Australians during one of the most significant economic crises in a generation if we do not act now to regulate this industry.”
In November 2020, ASIC released a report entitled, Buy now pay later: an industry update, which set out the key observations about the Buy Now Pay Later (BNPL) industry, the experiences of consumers and recent regulatory developments;
(b) The report found that:
i. More than 1 in 5 BNPL consumers surveyed missed a payment in the last 12 months, resulting in over $43 million in late fees for the 2018-2019 financial year.
ii. Most BNPL consumers who had missed a payment had used multiple BNPL providers in the last six months.
iii. Nearly 40 per cent of BNPL consumers surveyed who had missed a payment in the last 12 months also had a payday loan or similar.
iv. 20 per cent of all BNPL consumers surveyed said they had cut back or went without, essentials, like meals, to make their payments.
(c) BNPL providers have stated no more than 1 per cent of their consumers have been in financial hardship during COVID-19. This is inconsistent with the observations contained in the ASIC report for the 2018-2019 financial year.
(d) BNPL providers are not regulated by the National Consumer Credit Protection Act and are therefore not bound by responsible lending obligations.
Calls on the Federal Government to:
(i) Respond to the Report of the Senate Standing Committee on Economics entitled Credit and Financial Services Targeted at Australians at Risk of Financial Hardship tabled in the Parliament in February 2019 as a matter of urgency;
(ii) Introduce a Bill that would amend the National Consumer Credit Protection Act 2009 to enact the recommendations of the Federal Government’s Review of Small Amount Credit Contract Laws;
(iii) Extend the National Consumer Credit Protection Act 2009 to BNPL providers; and
(iv) Consistent with the Recommendations of Commissioner Kenneth Hayne, ensure no changes are made to the National Consumer Credit Protection Act 2009 that would undermine or weaken responsible lending obligations.