Govt moves to regulate buy now, pay later
The federal government is looking to regulate buy now, pay later products and operators to stop consumers racking up debts they can’t pay back.
Consumer groups have joined forces to urge the government to adopt the toughest of the three options recommended by Treasury, which would see buy now pay later products treated the same way as other credit products.
“We’re not asking for anything special – just that buy now, pay later plays by the same rules as everybody else that lends money to consumers, including the obligation to lend safely,” CHOICE head Alan Kirkland said.
Consumer groups say the other options – bolstering the industry’s self regulatory code with credit checks, or partially bringing BNPL into the credit code by introducing a sliding affordability test – would not be enough to stop the financial products inflicting harm.
“BNPL is credit, plain and simple, so it needs to be regulated in the same way as other credit products to provide people with adequate safeguards,” Financial Counselling Australia chief executive officer Fiona Guthrie said.
Guthrie said financial counsellors were reporting a surge in financial stress caused by buy now pay later products.
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“People are having to forgo other essential items in order to pay their BNPL debts,” she said.
Financial Services Minister Stephen Jones flagged the changes to BNPL regulations on Monday, with credit checks likely to be implemented at a minimum.
“We don’t want to see people in the same situation they were in the bad old days of credit cards … they might have had five, six, seven or eight credit cards,” he said.
“No one company knew the other one had one, and this person was just simply unable to pay off their debts and they were in a dire credit downward spiral.”
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Jones said changes should be finalised within a one-year window.
“A lot of people have got not one, not two, but three or four buy now pay later accounts and it appears there is a small percentage of the market where people are getting into hot water,” he said.
“We want to ensure that this product is operating safely where it’s being marketed, where it’s being pitched to consumers, it’s operating within the normal guardrails that operate with other credit products.”
Consumer Action Law Centre chief executive officer Gerard Brody said one of the issues with BNPL is that direct debits prioritise repayments over other expenses.
“The practice of providers denying service access to those that fall into arrears can also have perverse impacts, as people respond by prioritising repayments so they don’t get kicked off the app.”
He said these design features were disguising financial distress as providers could report low rates of default.
-AAP
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