Buy Now Pay Later users are missing meals and essentials to pay their debts, more government data has confirmed.
Services like Afterpay, ZipCo, Humm, LayBuy, Payo and others are leading some young people (in particular) into financial hardship, despite not being classified as credit providers. There are reportedly 9.1 million active BNPL accounts in Australia.
21 per cent of BNPL users rack up late fees, ASIC has reported while 20 per cent of users have gone without essentials (like meals) and 15 per cent have taken out an additional loan to pay off BNPL debts.
Over 70 per cent of BNPL users who pay their BNPL bills with a credit card are paying interest on their credit card debt says ASIC.
Yesterday, new advice from New Zealand's Ministry of Business, Innovation and Employment (MBIE) confirms the ASIC findings and warns that "lack of affordability assessments" by BNPL providers such as Afterpay make accumulating debt too easy.
Between 9 and 15 per cent of BNPL users are missing payments in NZ.
"Consumers are going without essential goods in order to make their BNPL payments and defaulting on household bills, credit card and home loan repayments," the MBIE has reportedly found.
"There is also increasing evidence of BNPL customers using credit to make their BNPL repayments."
Afterpay enjoys 40 per cent of NZ's Buy Now Pay Later market and, along with other providers, has been warned they could be forced to comply with responsible lending rules by NZ's Commerce and Consumer Affairs Minister David Clark.
"When you break up payments into bite-sized pieces, it can incentivise people to overspend," Gemma Rasmussen from New Zealand’s Consumer NZ group told NewsHub.
Australian consumer group CHOICE says the safest way to buy goods and services is to save and pay up front.
However BNPL services like Afterpay require merchants to spread their fees across all sales.
For example, Brisbane-based BNPL provider Payo's Terms and Conditions tells merchants:
"You must not inflate your cash price to our customers."
Payo also insist that no merchants give cash buyers "no further discount."
However, Payo, Afterpay and other BNPL providers charge merchants relatively high fees.
Afterpay merchant fees are $0.30 plus 3% to 7%, says CHOICE.
Cash Welcome says cash users should be entitled to pay at least 3% to 7% less than BNPL users.
Why are responsible cash users subsidising these huge Buy Now Pay Later companies?
Treasurer Josh Frydenberg is currently considering a review of payment systems regulations by lawyer Scott Farrell.
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