CHOICE has joined consumer groups from 9 countries calling for urgent action on buy now, pay later (BNPL) credit providers as new data shows many Australians are struggling with this form of debt.
The global statement released by Consumers International is supported by 11 consumer organisations from 9 countries. View the full international statement on the buy now, pay later credit industry here.
CHOICE CEO, Alan Kirkland, said this international statement shows how much damage these unregulated financial products are causing across a number of countries.
"International consumer groups have sounded the alarm on the harm being caused by the unfettered buy now, pay later industry. We are calling for governments across the world - including the Australian Government - to ensure that buy now, pay later providers are subject to the same consumer protection laws as other credit providers."
"It's time to close the loophole in the buy now, pay later industry in Australia. For too long, companies have been allowed to sell unregulated loans to Australians. Failure to act will create further hardship for individuals and families who are already doing it tough."
The global statement comes as this week CHOICE released new nationally representative data that found:
- 30% of Australians have used a buy now, pay later service in the past 12 months
- Over one in five (21%) of people who have used a buy now, pay later loan in the past 12 months have used it to pay for essential goods and services, such as food, groceries, or utilities
- 15% of buy now, pay-later users have missed or been late on a payment.
- 78% of people who have missed or been late on a payment have experienced financial hardship as a result of buy now, pay later fees, including taking out an additional loan or foregoing household essentials.
"Buy now, pay later credit providers are known for targeting people with existing loans, encouraging them to use buy now, pay later loans to pay for essential goods and services, such as food, electricity bills, and rent. This is a fast path to extreme financial hardship. Financial counsellors have reported an increase in people with multiple loans from different BNPL companies."
Mr Kirkland said there was research showing strong community support for better regulation.
"Almost nine in ten (87%) Australians agree that buy now, pay later companies should have to check someone's capacity to repay a loan as part of the application process as credit cards are legally required to do."
"It is critical to fix this loophole in our laws, to ensure these businesses can't create debt traps for low-income households by providing credit that looks easy but is ultimately unaffordable. In some cases, people spend years trying to pay back debt they have signed up for in minutes."
Sign the joint statement calling on governments to protects consumers from the growing risks of buy now, pay later loans here: www.choice.com.au/jointstatement
Read about how buy now, pay later loans may affect your ability to get a home loan here: www.choice.com.au/money/credit-cards-and-loans/personal-loans/articles/bnpl-loans
Media contact: 0430 172 669, firstname.lastname@example.org
The Global Statement, including a list of all 11 consumer organisations can be viewed here. The six key asks for effective regulation of Buy Now Pay Later:
- Regulate Buy Now Pay Later products in the same way as other forms of credit. This includes ensuring that measures such as caps on fees and charges, restrictions on unsolicited marketing and obligations to help people in financial hardship that apply under national laws are extended to BNPL.
- Require merchants to provide an option that allows a consumer to pay for a product in full at the time of purchase. For online purchases, this should be the first option that is presented.
- Obligate Buy Now Pay Later providers to assess whether it is suitable and affordable to provide credit to people, without risk of causing financial harm.
- Prohibit Buy Now Pay Later providers from marketing their products in ways that target children or people in financial hardship.
- Enable consumers to have access to redress through fair and independent mechanisms when something goes wrong.
- Ensure regulators monitor and report publicly on the impact of Buy Now Pay Later products for different groups of consumers. To support this, BNPL providers should be required to report publicly on key indicators mandated by regulators, including levels of late payments and numbers of customers in arrears.
CHOICE has also released a new investigation into the rise of data collection by buy now, pay later providers.
CHOICE Consumer Pulse January 2022 is based on a survey of 1,078 Australian households. Quotas were applied for representations in each age group as well as genders and location to ensure coverage in each state and territory across metropolitan and regional areas. Fieldwork was conducted from the 17th to the 31st of January 2022.