Afterpain Day: Consumer groups, financial counsellors warn shoppers about dangers of Afterpay Day
MEDIA RELEASE
If you’re thinking of a shopping spree on ‘Afterpay Day’ this week, remember that your splurge can easily become a case of Buy Now, Pain Later.
A coalition of consumer groups is warning that the national marketing campaign by Afterpay and major retailers can easily lure people into being sold unregulated loans designed to evade important consumer protections that apply to other forms of credit. What might seem like a bargain on the day, can soon become a financial mess when repayments fall due, they say.
Financial Counselling Australia CEO Fiona Guthrie said financial counsellors repeatedly dealt with the fallout from Buy Now, Pay Later (BNPL) marketing gimmicks that encourage impulse buying.
“We see it again and again – people facing financial hardship because, without proper rules around BNPL loans, it is too easy for people get in over their heads.
“Financial counsellors often help people who have made a series of what seem like small purchases, but quickly add up to a lot of money. Pretty soon, people get overwhelmed, they miss a payment, are hit with late-payment fees and possibly account-keeping fees, and their debt starts to snowball.
“It’s a case of today’s hot buy becoming tomorrow’s headache.”
Ms Guthrie said BNPL purchases tend to sneak up on buyers. It can be very easy to go from $25 a fortnight over eight weeks for a jumper, to buying a few more items over the next few weeks then suddenly finding you have committed the equivalent of your food or rent to BNPL repayments, she said.
Ms Guthrie said it was why FCA had joined with 22 other community and consumer groups calling for BNPL to be regulated as conventional credit, with the same safe lending rules as other comparable forms of credit.
CONSUMER ACTION LAW CENTRE CEO STEPHANIE TONKIN
Ms Tonkin said BNPL was unregulated credit that was exploiting loopholes in the system.
“We hear all the time from people who don’t have one BNPL debt, they have multiple accounts which push them into a debt spiral and ultimately financial crisis,” Ms Tonkin said. “Stunts like ‘Afterpay Day’ are just going to make it worse for those already struggling to get by.
“Warnings like this one wouldn’t be necessary if BNPL was fully regulated under the Credit Act.”
FINANCIAL RIGHTS LEGAL CENTRE CEO KAREN COX
“Stunts like Afterpay Day are just irresponsible,” Ms Cox said. “Many budgets are already stretched by rising interest rates, rents and inflation. Tempting people to take on more debt without any checks and balances on their ability to pay is setting them up to fail.”
CHOICE CEO ALAN KIRKLAND
“Buy now, pay later credit providers frequently use marketing tactics like ‘Afterpay Day’ to encourage people to take on extra debt. These tactics include offering ‘discounts’ in order to make people feel like they’ll be missing out on a good deal unless they buy on the spot.
“These providers are taking advantage of loopholes – this means that they don’t have to check whether a loan is affordable before providing it. We welcome the Federal Government’s commitment to step in and regulate these products like other forms of credit”, Mr Kirkland said.
CONSUMER CREDIT LEGAL SERVICE WA, PRINCIPAL SOLICITOR ROBERTA GREALISH
Ms Grealish said it was “hugely problematic” that people don’t view BNPL as credit, as they don’t take it as seriously when signing up.
“These types of marketing campaigns only compound the problem,” she said. “We know that the consequences can be just as serious as other forms of credit. We must change the rhetoric.”
BACKGROUND
In May 2022, more than 120 community groups signed an open letter calling on the new Government to regulate BNPL as conventional credit, with the same safe lending rules as other comparable forms of credit, following the groups’ experience of mounting cases of financial hardship fuelled by BNPL.
In July 2022, consumer groups welcomed the new Government’s commitment to consult on how to best regulate BNPL.
MEDIA CONTACTS
Financial Counselling Australia, Mike Bruce 0403 920 189
CHOICE, 0430 172 669
Financial Rights Legal Centre, email [email protected]
Consumer Action Law Centre, Mark Pearce 0413 299 567
MEDIA RELEASE
Afterpain Day: Consumer groups, financial counsellors warn shoppers in lead-up to Buy Now, Pay
Later marketing blitz
If you’re thinking of a shopping spree on ‘Afterpay Day’ this week, remember that your splurge can easily become a case of Buy Now, Pain Later.
A coalition of consumer groups is warning that the national marketing campaign by Afterpay and major retailers can easily lure people into being sold unregulated loans designed to evade important consumer protections that apply to other forms of credit. What might seem like a bargain on the day, can soon become a financial mess when repayments fall due, they say.
Financial Counselling Australia CEO Fiona Guthrie said financial counsellors repeatedly dealt with the fallout from Buy Now, Pay Later (BNPL) marketing gimmicks that encourage impulse buying.
“We see it again and again – people facing financial hardship because, without proper rules around BNPL loans, it is too easy for people get in over their heads.
“Financial counsellors often help people who have made a series of what seem like small purchases, but quickly add up to a lot of money. Pretty soon, people get overwhelmed, they miss a payment, are hit with late-payment fees and possibly account-keeping fees, and their debt starts to snowball.
“It’s a case of today’s hot buy becoming tomorrow’s headache.”
Ms Guthrie said BNPL purchases tend to sneak up on buyers. It can be very easy to go from $25 a fortnight over eight weeks for a jumper, to buying a few more items over the next few weeks then suddenly finding you have committed the equivalent of your food or rent to BNPL repayments, she said. The example below shows how quickly BNPL loans can escalate into an overwhelming debt:
Ms Guthrie said it was why FCA had joined with 22 other community and consumer groups calling for BNPL to be regulated as conventional credit, with the same safe lending rules as other comparable forms of credit.
CONSUMER ACTION LAW CENTRE CEO STEPHANIE TONKIN
Ms Tonkin said BNPL was unregulated credit that was exploiting loopholes in the system.
“We hear all the time from people who don’t have one BNPL debt, they have multiple accounts which push them into a debt spiral and ultimately financial crisis,” Ms Tonkin said. “Stunts like ‘Afterpay Day’ are just going to make it worse for those already struggling to get by.
“Warnings like this one wouldn’t be necessary if BNPL was fully regulated under the Credit Act.”
FINANCIAL RIGHTS LEGAL CENTRE CEO KAREN COX
“Stunts like Afterpay Day are just irresponsible,” Ms Cox said. “Many budgets are already stretched by rising interest rates, rents and inflation. Tempting people to take on more debt without any checks and balances on their ability to pay is setting them up to fail.”
CHOICE CEO ALAN KIRKLAND
“Buy now, pay later credit providers frequently use marketing tactics like ‘Afterpay Day’ to encourage people to take on extra debt. These tactics include offering ‘discounts’ in order to make people feel like they’ll be missing out on a good deal unless they buy on the spot.
“These providers are taking advantage of loopholes – this means that they don’t have to check whether a loan is affordable before providing it. We welcome the Federal Government’s commitment to step in and regulate these products like other forms of credit”, Mr Kirkland said.
CONSUMER CREDIT LEGAL SERVICE WA, PRINCIPAL SOLICITOR ROBERTA GREALISH
Ms Grealish said it was “hugely problematic” that people don’t view BNPL as credit, as they don’t take it as seriously when signing up.
“These types of marketing campaigns only compound the problem,” she said. “We know that the consequences can be just as serious as other forms of credit. We must change the rhetoric.”
BACKGROUND
In May 2022, more than 120 community groups signed an open letter calling on the new Government to regulate BNPL as conventional credit, with the same safe lending rules as other comparable forms of credit, following the groups’ experience of mounting cases of financial hardship fuelled by BNPL.
In July 2022, consumer groups welcomed the new Government’s commitment to consult on how to best regulate BNPL.
MEDIA CONTACTS
Financial Counselling Australia, Mike Bruce 0403 920 189
CHOICE, 0430 172 669
Financial Rights Legal Centre, email [email protected]
Consumer Action Law Centre, Mark Pearce 0413 299 567