Concerns new product will lure more people into debt

ABC NEWS (Australia)

Consumer advocates are sounding the alarm about a new product from the buy now pay later company Afterpay. It has launched the subscription platform "Afterpay plus” which for an annual fee allows customers to access loans at more retailers using services such as apple pay.

Transcript

00:00 Afterpay is moving to a subscription model and what that means is that more and more

00:06 people will be able to access this service.

00:09 We need to remember that buy now pay later in Australia is essentially unregulated.

00:13 It's still using a loophole in the law and in my world of financial counselling where

00:17 we help people who are experiencing financial hardship, this means we're going to see

00:21 more and more people who are experiencing harm from this product because we're seeing

00:26 more and more people using it for things like food, utilities, petrol, for the essentials,

00:32 just to get by.

00:33 And so this is not good news for many people who are doing it tough.

00:37 What would you say to people who argue they haven't got enough money to buy something

00:43 immediately and this helps them do that?

00:48 Credit is often not the answer to financial difficulty and the problem with this product

00:52 is it is a credit product and it causes harm.

00:56 We know that one in four people are using it for essentials, we know one in five people

01:00 are missing payments.

01:02 And the key now is to make sure that this product is regulated properly so it becomes

01:08 safer.

01:09 There is nothing the matter with having this as a payment mechanism but let's make sure

01:13 that we operate on an equal playing field.

01:15 That means that buy now pay later should have to verify a person's income and they should

01:20 be part of the credit reporting system.

01:22 And should that be straightforward enough to design such a regulation and introduce

01:26 it?

01:27 Well we would have thought so but we'll wait to see what the government comes up with.

01:31 We're expecting those laws early next year and it's excellent news that they are doing

01:35 that but if we are going to regulate buy now pay later we have to do it properly.

01:39 There is no point just putting in a whole lot of layers of complex regulation if it

01:43 doesn't address the core harms of the product.

01:47 And what are your broader concerns with the buy now pay later sector?

01:52 Well apart from operating in a loophole through a loophole in the law is that so many people

01:57 end up finding that the product doesn't actually work for them.

02:00 The people who are using buy now pay later tend to be what you would describe as financially

02:05 fragile.

02:06 So they're already using it, they've already probably got credit card debts, they're probably

02:10 struggling with other parts of their financial management and so buy now pay later doesn't

02:16 actually help them, it actually makes things worse off.

02:19 And in a cost of living crisis and in inflation it may just kick the can down the road a little

02:24 bit further but you end up in a worse position.

02:27 So what's your advice to people using the buy now pay later sector or thinking about

02:33 using it?

02:34 Well I think really carefully about this product at $10 a month or $120 a year, it's essentially

02:40 a low limit credit card and why would that be a good deal?

02:43 But it may be that if you've got more substantial problems around making ends meet that you

02:47 should come and speak to a free and independent financial counsellor and you can do that by

02:51 ringing the National Debt Helpline on 1800 007 007.

02:56 And Fiona what are some individual stories that you've come across?

02:59 Oh look lots, for example a single mum with some children and she started using buy now

03:05 pay later, I think her income was something like $580 a week.

03:10 One week she was paying more than 50% of her income on buy now pay later, averaging about

03:16 40%.

03:17 Now that's probably at one end of the spectrum but we do see this commonly in financial counselling

03:23 that people are finding that they don't have enough money for their rent, they don't have

03:27 enough money for food because they're using buy now pay later and then have to pay these

03:31 debts back.

03:32 And yeah, just where can people get in touch with organisations?

03:37 Well again financial counselling is a free service, community based, confidential, the

03:41 National Debt Helpline number is 1800 007 007.

03:45 [BLANK_AUDIO]

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