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Working for your financial and consumer rights
Buy now pay later (BNPL) allows you to buy and receive goods and services immediately and pay for those purchases over time.
Unlike regular credit, BNPL services do not charge interest, instead, fees may apply including:
These fees may be costly, especially if you have multiple accounts with multiple providers or you miss a payment.
Moneysmart have outlined key tips you should consider before entering into a BNPL arrangement. See their video below.
While BNPL is marketed as a convenient budgeting option, effectively managing multiple repayments on multiple accounts to multiple providers can be challenging.
Staying on top of multiple payments can make it hard to track your spending, and can leave you with repayments, including fees, that you can’t afford. It is easy to fall into a debt spiral if you are being charged late fees by your provider and dishonour fees by your bank! If you have linked your BNPL account to a credit card, then you may also be paying credit card interest on your purchases.
Because BNPL operates within a current loophole in lending laws, it is not regulated in the same way as other credit products under the National Consumer Credit Protect Act 2009. So, when things go wrong, you do not have the same consumer protections.
Most BNPL providers are signatories to the AFIA BNPL Code and will have an internal dispute resolution (IDR) process for handling complaints and hardship applications. The AFIA BNPL Code can be found here.
Code subscribers are also required to be members of the Australian Financial Complaint Authority (AFCA). If you are unable to resolve a complaint at IDR and if you wish to escalate a complaint to the AFCA, you can use AFCA’s “find your financial firm” search tool to check if your BNPL provider is a member.
If your BNPL provider is not a signatory to the Code or a member of AFCA you have very limited protection if you are in financial hardship.
BNPL may affect your credit rating. Some providers can make listings on your credit file and this may impact on your ability to get credit in the future.
Future lenders may also consider your spending habits when assessing your credit worthiness.
CCLS continues to call for tighter regulation of BNPL in the wake of the harm we see these products cause, plunging consumers into debt spirals they cannot control.
We joined with 22 other consumer organisations to make a submission calling on the government to regulate BNPL. The submission calls for BNPL to be regulated like other forms of credit – such as credit cards and personal loans – under the National Consumer Credit Protection Act 2009, most importantly requiring safe lending checks and robust hardship support for those who can’t make a payment on time.
Read our Joint Consumer Submission to Treasury: Regulating BNPL Options here.
If you require further advice, please message us using the form below for a confidential discussion, or scroll down to see other ways to reach us.
