Two million Australians used 'buy now, pay later' schemes in the last financial year, leading ASIC to increase regulatory activity.
Corporate watchdog ASIC has raised concerns about ‘buy now, pay later’ services such as Afterpay, which are used by a growing number of Australian businesses and their customers.
A review of the services by ASIC found that one in six users of 'buy now, pay later' services overdrew funds, delayed bill payments or became financially overcommitted and unable to pay late fees.
ASIC noted that the operators of ‘buy now, pay later’ services had made improvements that benefited consumers, including reviewing their standard contracts for potentially unfair terms
The regulator will nonetheless monitor the services to ensure they provide adequate consumer protections. It has also warned it will take regulatory action to address misconduct by ‘buy now, pay later’ providers.
"The exponential growth in this industry, along with the risks we have identified, means this will remain an area of ongoing focus for ASIC. One area we will be targeting is where consumers are paying more than they need to for using a buy now, pay later arrangement", said ASIC Commissioner Danielle Press.
Plenty of willing shoppers
If you are looking for a way to sell more to younger Australians, offering a ‘buy now, pay later’ arrangement could help. The number of Australians using them jumped from 400,000 in the 2015-16 financial year, to 2 million in the 2017-18 financial year, according to ASIC. More than half of those people are between 18 and 24 years old.
You also have various ‘buy now, pay later’ schemes to choose from. They include Afterpay, zipPay, Certegy Ezi-Pay, Oxipay, BrightePay and Openpay.
It’s not just big retailers such as Big W, Target, Harris Scarfe and Kmart using these services – many smaller businesses, such as specialty retailers, also offer the schemes.
Market leader Afterpay’s sales pitch to retailers is that its service integrates with their online stores and also settles transactions quickly and automatically.
It claims it “converts customers that would have otherwise abandoned, generating more sales from the existing customer base and creating new customers.”
However, because ‘buy now, pay later’ service providers don’t need to comply with responsible lending laws, there are growing concerns about misuse.
To protect consumers, ASIC can “take action where a buy now pay later provider engages in conduct that is misleading or unconscionable.”
Proposed changes to “product intervention” law could also give ASIC a “flexible tool kit to address emerging products and services such as buy now pay later arrangements”, the regulator reported.