‘Dangerous’: Alarm about Afterpay relocation

The buy now, pay later giant is venturing into bold new territories, but a warning has been issued that consumers are at “real risk of harm”.

Afterpay has announced it will be moving to even more services like restaurants, butchers and hairdressers as it targets “brick and mortar” retailers, but consumer advocates have warned the latest offering is “dangerous.”

The American company Block, which bought Afterpay last August for a a whopping $39 billionsaid it was offering the payment option of four biweekly installments to customers who shop at millions of its retailers, both in Australia and the US.

This move will allow retailers to accept buy now pay later (BNPL) in-store, where a customer simply taps to pay using a mobile wallet loaded with their virtual Afterpay card.

It also rolled out Afterpay to its e-commerce in February, but the BNPL’s latest move is a departure from providers’ focus on online shopping.

Alyssa Henry, head of Square, said the move could mean that Afterpay was used for a wider range of purchases, such as the hairdressers.

“You’re probably not going to buy $3 coffee” [with Afterpay]but a lot of restaurants have catering orders or butcher shops… so there are some places where food and drink come into play, as well as a $100 haircut,” she said. The Sydney Morning Herald

But Consumer Action Law Center CEO Gerard Brody said consumers are at “real risk of harm” when using BNPL providers.

“I think it’s going to be such a ubiquitous and widespread product — everywhere we go is buy now, pay later — and it’s really worrying that these providers like Afterpay aren’t subject to the same safeguards as other financial products,” he told IPS. news .com.au.

“It is a failure of our government to ensure that people are treated fairly and have consistent consumer protections no matter where they shop and where they get products from.

“It certainly has the potential to put users more in debt – credit is a pretty dangerous product and that’s why safeguards are built in. People should not use credit for everyday expenses.”

Mr Brody said that if people buy now, use pay later to pay for small amounts, such as a $100 haircut, it could get them in trouble as they have to pay back in addition to their essential bills.

Ultimately, it only leads to even more debt for many clients, and his organization sees people affected by BNPL in all age groups and cohorts saddled with unsustainable repayments and using multiple accounts.

“It turns into using more credit and buying now, pay later providers and we see people who have five or six buying now, paying accounts later at once… I think it’s very risky to rely on credit for daily purchases such as to hairdressers, butchers and restaurants,” he said.

“Even small amounts can cause great stress if the repayments are unaffordable. If people don’t have the money to make the refunds, BNPL providers can charge late fees and that adds up and can incur costs for you and it can result in overdrafts and getting standard fees that are your bank will be charged.

“Then you might not be able to afford essential expenses like rent and utilities.”

An Afterpay spokesperson said that by using the BNPL provider, consumers can avoid using expensive loans and credit cards, leading to revolving and compounding debt at interest rates of 20 percent or more.

“BNPL products and services are regulated – they are already required to comply with various legal and regulatory obligations, and are overseen by ASIC, ACCC, AUSTRAC, OAIC and the courts. This includes ASIC’s broad product intervention power and oversight through its design and distribution commitments,” she said.

“Credit cards are regulated differently because they expose consumers to the risk of expensive and long-term debt. Paying afterwards is the opposite. We start consumers with low spending limits – a few hundred dollars – and the first installment payment is required upfront.

“All purchases with Afterpay must be paid off within six to eight weeks and we prevent a consumer from spending money once he misses a refund.”

In November last year, Afterpay also revealed that it would be available in 160 bars across Australia, alarming consumer advocates who said it could lead to a “debt spiral” for people.

New BNPL players are also pushing in the real estate sector by offering to pay people’s rent.

Mr Brody said that “buy now, pay later” providers should be regulated, as should other financial products such as credit cards and loans.

“It’s important that every lender makes sure that those repayments are affordable and that the product is suitable for the consumer and that Afterpay simply doesn’t have to follow the same law as other lenders,” he said.

Afterpay’s latest move comes as investors seek a reward for Block’s massive takeover of the BNPL provider, which has taken a major blow to the stock market.

The Australian company’s first results since the acquisition left much to be desired, as Afterpay net loss of $345.5 million during the six months to December 31, 2021.

Ms. Henry acknowledged the “volatility” of Buy Now, Pay Later Space, but said the company believed Afterpay offered a huge “opportunity” for pairing with Block’s cash app — a consumer app designed for payments and investing.

“We just think it’s super engaging, we think it’s really unique and we believe in the long-term value it’s going to create for shareholders,” she said.

Experts have previously predicted potential “bloodbath” for the industry, buy now, pay later, as providers burn cash, bad debts rise and customers withdraw from using the service — a model they say is unsustainable.

#Dangerous #Alarm #Afterpay #relocation

Leave a Comment

Your email address will not be published. Required fields are marked *