Senate Cracks Down on ‘Buy Now, Pay Later’ Services

The Senate has reportedly launched an inquiry into buy now, pay later services that aren’t covered by the banking royal commission. News of the Senate’s inquiry caused Afterpay’s shares to drop 18.93 percent in trade on Wednesday, closing at a low of $11.35.
In a statement, Afterpay has said it “welcomes” the opportunity to participate in any review of the industry, and recognises that its services are different to traditional forms of credit.
“Afterpay welcomes the opportunity to participate in any review to ensure an informed discussion takes place in an appropriate forum and that the differentiated nature of Afterpay’s service is clearly understood,” the company said.
“Afterpay promotes responsible spending and offers customers a fundamentally different proposition to traditional credit products.
“Our model is unique in that we provide a free service to customers if payments are made on time. We do not charge interest or monthly fees, our instalment periods are short, and if payments aren’t made on time we immediately suspend a customer’s account, which means they will never be caught in revolving debt.”
While retailers have welcomed the emergence of alternative payment schemes in the Australian retail market, consumer advocate groups have been sceptical of the righteousness of these service’s, fearing they’re preying on vulnerable Australians. According to Consumer Action Law Centre’s CEO, Gerard Brody, the inquiry into both buy now, pay later services and debt management firms is a welcome decision by the Senate.
“The Senate inquiry is an important initiative and will expose those financial-services providers that have been left free to prey on financially struggling Australians for too long,” Brody said.
According to Afterpay, its services are designed to assist Aussie shoppers, not create any further hardship.
“The vast majority of our revenue is derived by fees paid by retailers and merchants, which allows us to offer an interest-free product to consumers. The overwhelming majority of consumers pay on time and have never incurred a late fee,” the company said.
The company has also acknowledged that it is working towards finding an “appropriate regulatory solution”, in light of concerns over its business offering.
After releasing a public statement about the FinTech’s position on the inquiry, Afterpay’s shares have recovered slightly, with the company trading at $12.68  Thursday morning.
In August, Afterpay released its annual results, reporting an increase in revenue of 397 percent, bringing its sales figures up to $113.9 million and a loss of $9 million. The company reportedly has 2.3 million customers on its platform and 17,000 merchants.
Never miss our best stories. Sign up for Power Retail’s free weekly newsletter and find our daily stories on Facebook, Twitter, LinkedIn, and Instagram.