Stickers advertising Afterpay and Zip on the window of a clothing store.

“Improper Lending”: “Buy Now, Pay Later” Industry to Face New Regulations to Stop Financial Abuse

An estimated 7 million Buy Now, Pay Later users will soon see new federal government laws aimed at better protecting them from financial abuse.

A new financial paper released on Monday by Finance Services Secretary Stephen Jones suggests that “buy now, pay later” gamblers could soon be subject to the same laws as credit card issuers as “unaffordable or inappropriate lending practices cause financial stress and hardship and other types.” contributing to consumer harm”.

The newspaper said there were 7 million active buy-now pay later accounts in fiscal 2021-22, resulting in $16 billion in transactions, an increase of nearly 37 percent over the previous fiscal year .

Mr Jones told ABC News that while these products – which are offered by well-known providers such as Afterpay, Zip Pay, humm and Klarna – can provide an easy alternative credit option, vulnerable and/or younger consumers are often at risk.

“Many Australians have unpayable debt,” Mr Jones said.

“And what we do know is that a lot of people are buying a lot, a lot, a lot, pay now and pay accounts later.

Stephen Jones says that “it makes sense to have some credit controls” for “buy now, pay later” players. (ABC News: Matt Roberts)

He said most of those accounts are held by people between the ages of 18 and 35.

“We think it makes sense to set up some credit controls.”

Consumer groups, including Financial Counseling Australia and the Consumer Action Law Centre, have long argued that buy-now, pay-later providers should comply with the same responsible lending laws as other lenders.

Despite this, a Senate inquiry into fintech conducted two years ago under the previous administration suggested not regulating it and instead having an industry code that players could voluntarily adhere to if they chose to.

“Bad handling of complaints”

But the Treasury paper makes it clear that without some controls, self-regulation is no longer an option.

It poses a number of issues, noting that there are reports of “poor complaint-handling processes” and that “a lack of hardship support for consumers results in delayed or unsatisfactory remedial action”.

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