Young part-time workers, students and low income earners are at risk of being trapped in financial debt through buy now pay later schemes like Afterpay.

The Australian Securities and Investment Commission (ASIC) highlighted its concerns into the growing popularity of schemes such as Afterpay in a submission to the federal Senate Inquiry into credit and financial services targeted at Australians at risk of financial hardship.

Up to 25 per cent of customers who use Afterpay are experiencing financial stress, according to a recent Mozo nationwide survey of 1000 customers who use Australia’s most popular buy now pay later provider, shares Daily Mail.

Now available at many major Australian retailers, buy now pay later schemes allow consumers to pay for a purchase by instalments without incurring upfront charges.

The schemes are not regulated by the National Credit Act, which means providers don’t need to consider the income and existing debts of customers.

Around two million consumers have used a buy now pay later arrangement in the last 12 months, according to ASIC data.

‘There is a significant level of use of buy now pay later loans by younger consumers who are either students or only part-time employed,’ its submission states.

‘Some merchants use aggressive sales strategies to target low-income consumers, which can result in sales of goods and services to consumers that they do not need or would have trouble affording.’

One of the biggest risks to consumers is they can be trapped into ‘significant’ debts of up to $30,000 through these schemes and struggle to pay for more important expenses such as rent, groceries and utilities.

‘Because these arrangements can be obtained quickly and can be promoted in a way that focuses consumer attention on relatively small repayment instalments rather than the total purchase price, consumers can be at a higher risk of proceeding with a buy now pay later purchase without carefully considering the total debt that they would incur,’ the submission states.

ASIC currently has restricted jurisdiction to address potential risks to consumers using these schemes and has called for more regulation.

‘We consider that ASIC’s proposed product intervention power should include all credit regulated under the ASIC Act, so that we can act quickly to address any significant consumer detriment to consumers from these arrangements,’ the submission states.

‘It would minimise regulatory cost and it would therefore foster consumer trust and confidence in buy now pay later arrangements, especially during this period of substantial growth.’

The ASIC report acknowledged Afterpay’s support to extend proposed product intervention powers in its submission to the Senate inquiry.

Read more – The Afterpay Trap Getting Teens in Trouble

Share your comments below

  • agreed, young people would have trouble learning the true value of money. If you can’t afford it now, you can’t afford it later


  • After pay is certainly a trap for young people. It’s just so easily available


  • Really, it’s the same principal as credit cards. If you can’t pay it down the track don’t do it


  • I don’t think afterpay is the issue, its people being not responsible for their actions. I have a great niece who has got herself into so much debt. She lives on centrelink benefits, has 2 kids, a useless waste of space for a partner. But she has no idea about money. She went over the top for Xmas, is weeks behind in her rent, owes $3000 for power (so close to having it disconnected) She has a centrelink debt back from when she was younger that she’s paying off still. Thousands of dollars in debt, but she’s still online buying all the branded stuff for her kids. She shoplifts meat and small items to resell to make some cash. Really…..she just needs to live within her means! She claims centrelink don’t pay enough but she’s not interested in working or looking for work or getting back into study to improve her job prospects. Some people just aren’t prepared to knuckle down and help themselves, there’s too much assistance from charities and the government and a lot take advantage


  • I don’t understand people choosing to go in debt over Christmas.
    We budget and and do not overspend. We use a credit card but pay it off every month.


  • I do have a credit card and I hate having to use it but we had to move in late September and it destroyed us financially, coupled with my kid’s father owing almost $15,000 in child support wecouldn’t have got through without it+


  • I don’t understand the appeal of this system. I’m trying to teach my children that the only thing that they should ever get into debt for is a house.


  • Not something I would ever use.


  • Yeah, it’s just like a credit card right?


  • Do you even pay a deposit like you do with layby? I have never had a Credit Card. My brother had one with a company he worked for because he got staff discount that way. When he left that company he closed the account himself and shredded the card.


  • I have never had a credit card or used afterpay. I spend what I can afford and then I can’t get into any trouble or regret anything after. It’s the way my parents taught me!


  • It’s all about knowing your budget and keeping to it.


  • People need to take more responsibility for their money and their own spending.


  • I LOVE Afterpay!!!


  • Nope! Not a fan! Will never ever get in debt for Christmas.


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