The Australian Securities and Investments Commission (ASIC) released its review on the rapidly growing ‘Buy Now, Pay Later’ industry. The ‘Buy Now, Pay Later’ facilities allow consumers to purchase and obtain goods and services immediately, but pay for the purchases over four equal payments.
After ASIC reviewing – Afterpay, ZipPay, Cetegy, Ezi-Pay, Oxipay, BrightePay and Openpay – they found that one in six users of the ‘Buy Now, Pay Later’ facilities became either overdrawn, delayed bill payments or borrowed additional money because of these facilities.
With the rapid growth of the industry which saw users of the facilities jump from 40,000 to 2 million, and transaction rise from 50,000 to 1.9 million from June 2016 to June 2018, ASIC has proposed that its product intervention power should be extended to ‘Buy Now, Pay Later’ providers.
Given that as at 30th of June 2018, there were approximately $903 million in outstanding ‘Buy Now, Pay Later’ balances, ASIC has suggested that the providers of these facilities may need to be required to comply with the National Credit Act to ensure customers are not over committing on their finances.
Under the National Credit Act, ‘Buy Now, Pay Later’ providers will have to conduct responsible lending checks on consumers to verify and confirm their financial position prior to using the service.
Why is there a concern and the need for ASIC to intervene?
ASIC’s intention to extend its product intervention power over the industry is to ensure that, as with every other form of credit facilities, consumers are not over committing themselves financially, due to access of these sort of facilities.
ASIC senior executive leader Michael Saadat went on to say;
“We can already see these arrangements are leading to people spending more,”
“We want to make sure consumers are using the service wisely and not get into a position where they are struggling,” he said.
If providers adopt appropriate safeguards, further regulation may not be required.