Financial distress from BNPL is rising. But Afterpay says more people should have access to it.
The financial complaints authority and financial counsellors are seeing growing financial distress from BNPL and support tighter regulation.
Buy now, pay later (BNPL) products are playing a growing role in financial distress and abuse, the Australian Financial Complaints Authority (AFCA) and several financial counselling and consumer groups have warned, as the government prepares to introduce new regulations for the sector.
According to AFCA, with growing use of BNPL there is “evidence of increasing reliance on BNPL products for essentials and of the cumulative harms experienced by some consumers unable to service multiple BNPL debts”.
“This experience is also reflected in BNPL complaints to AFCA which have increased year on year over the past three years, with significant impacts on vulnerable consumers with multiple BNPL debts,” AFCA said in its submission to Treasury’s review of BNPL regulation.
While individual BNPL debts are of lower value, typically in the hundreds of dollars, and late payment results in a fixed penalty rather than compounding interest, a major concern is the use of multiple accounts which are invisible to would-be lenders, given the currently unregulated nature of BNPL credit.
