Monday 16 November 2020: Some Australians are skipping meals, household bills and mortgage repayments as a result of overspending using buy now, pay later platforms, according to ASIC’s report into the industry released today.
The report found over a 12-month period:
- 21% of buy now, pay later (BNPL) users surveyed missed a payment.
- 20% of BNPL users surveyed cut back or went without essentials, including meals, as a result of overspending on these platforms.
- 15% of BNPL users surveyed had taken out additional loans to make ends meet.
- 1 in 5 users surveyed missed or were late paying other bills to make BNPL repayments. Of these:
- 44% missed paying household bills
- 32% missed credit card repayments
- 22% missed mortgage repayments.
Consumer advocate RateCity.com.au believes BNPL providers should do more to protect their customers from falling into financial hardship in their upcoming code of conduct, including:
- An industry-wide cap on late fees.
- Easy-to-find information about late fees and hardship programs.
- Proactive efforts to alert customers to the pitfalls of impulse shopping and overspending.
- Increased education around how to budget and manage debt, particularly for younger Australians.
- A minimum level of assessment for new customers.
- Ways to mitigate customers getting into multiple debts across multiple platforms.
RateCity.com.au research director, Sally Tindall, said the BNPL industry had a unique opportunity to address the issues highlighted in today’s report in their upcoming code of conduct.
“ASIC has found one in five users are getting into financial trouble as a result of overspending on these platforms, from skipping meals to skipping mortgage repayments. These findings need to be addressed – not brushed over or refuted,” she said.
“Buy now, pay later platforms can’t just rely on the number of hardship applications to know if their customers are falling behind financially.
“Many BNPL platforms automatically deduct repayments from customers’ accounts, which means they can’t see when they go into overdraft or can’t pay their bills.
“It’s time for the industry to accept some people are getting into strife, and, put forward policies that will address these issues.
“Greater education around the pitfalls of overspending and impulse buying will help customers use these services, and other forms of credit, wisely,” she said.
Afterpay is the biggest BNPL platform with over 3.4 million customers in Australia and New Zealand and around 48,000 merchants.
“While consumers can find themselves in financial hot water after using Afterpay, the platform puts customers on a much tighter leash than most credit cards,” she said.
“Afterpay is, in many regards, doing the right thing by its customers, with strict spending limits and tough rules around missing repayments. But more can always be done to help protect customers.
“The industry has a unique opportunity to address these issues through self-regulation. They’ve already got some good protections in place to stop customers getting on a debt treadmill.
“Let’s see if they can take this one step further and address the problems highlighted in ASIC’s report,” she said.
How to avoid getting into trouble using BNPL platforms:
- Read the terms and conditions and understand what fees you could get hit with.
- Set yourself strict spending limits.
- Limit yourself to one platform, and one purchase at a time.
- Don’t impulse buy. Sit on any major purchases for at least 24 hours.
- If you get into trouble, pull the pin and call for help. Each platform should have a hardship policy available.
Key BNPL services available in Australia – excludes personal loan payments plans.
|BNPL provider||What can you buy and where can you use it?||Payment schedule||Max value of purchases||Account fees||Late fees||Perform credit checks?|
|Afterpay||Use at affiliated retailers including eBay & Coles.||4 instalments over 8 wks||
|No interest or monthly fees.||$10 per late repayment and an additional $7 if you don’t pay in 7 days. Max fee 25% or $68 whichever is lower.||No|
|BrightePay||Home solar, battery upgrades and products||Between 6 months and 60 months||$1,000 - $30,000||$1 a week||$4.99 per late payment, $capped $49.99 per year||Yes|
|Bundll||Anywhere Mastercard is accepted. Can be used for essential and non-essential items||Repay within 2 weeks. Extend between 2 – 12 wks for a fee.||
|No fees for basic bundle. A 2-week extension costs $5. A 12 wk plan costs 5% of amount.||$10 late payment fee then account is suspended||No credit check for standard bundll. Credit check for ‘Superbundll’.|
|Deferit||Used only to pay bills (primarily utility bills)||4 fortnightly instalments||$2,000 limit per bill||$5.99 /mth when you have bills owing. Card payments include 1.5% + 20c fee.||None.||Yes|
|Fupay||Anywhere||8 weekly personalised repayments||$200 on Fu Cash, $500 on Fu Bills & Card||Fu Card has a one-off set up cost of $5.||Not states||No|
|humm (Little Things)||Use at affiliated retailers as well a majority of BPay billers. Primarily non-essential items.||5 or 10 fortnightly instalments||
|No fees if making 5 fortnightly instalments. $8 mthly fee if making10 fortnightly repayments.||$6 for each late payment||May check your credit rating, but this won't affect your score or leave a record on your file.|
|Klarna||Use in most stores via the Klarna app (excludes supermarkets).||Pay in 4 fortnightly instalments. Can extend for 10 days as a one time courtesy.||
|Up to $7 fee to extend for 2 weeks (dependent on purchase price).||$3 - $15, depending on purchase price, per late payment. Max fee is $45.||Yes - visible on your credit report but will not impact your credit score|
|LatitudePay||Use at affiliated retailers. Primarily non-essential items.||10 weekly repayments.||
|None||$10 per late payment, if you miss 3 or more payments your LatitudePay limit will be decreased.||Yes|
|Laybuy||Use at affiliated retailers. Primarily non-essential items.||6 weekly repayments||Not stated||None||$10 per late payment and an extra $10 if you don’t pay in 7 days.||Yes|
|OpenPay||Use at affiliated retailers. Primarily non-essential items.||Payment plans of between 1 and 24 mths.||Up to $17,500||An initial payment will be required at the time of purchase. Most of the time, this initial payment will be 20% of the purchase price.||Details of the late fees included in the application and approval email, depends on individual payment plans.||May do a credit check.|
|Payright||Use at affiliated retailers. Primarily non-essential items.||Flexible repayment schedule provided||up to $20,000||Establishment fee from $0 up to $89.95. A monthly account fee $3.50 (pro-rata) with each repayment & $2.95 payment processing fee which is also added to each repayment.||Late fees of up to $12.95.||Yes|
|PayItLater||Use at affiliated retailers. Primarily non-essential items.||4 weekly repayments||
|None||$10 per late repayment and an additional $10 if you don’t pay after a week.||Yes, but using its own tests and document verification services.|
|Splitit||Use at affiliated retailers. Some retailers require a credit card||Not stated||Works on existing credit card limit.||None||None||No|
|Zip Pay||Anywhere + BPAY||Flexible repayment schedule provided you pay a min $40 / mth||
|$6/mth if you have money owing.||Late payment fee of $5 after 21 days of not paying the minimum.||Yes|