It’s time to Close Lending Loopholes
As cost of living pressures rise, unregulated buy now, pay later companies are still taking advantage of people doing it tough.
We’ve seen countless examples of harmful buy now, pay later loans being marketed to people to pay for essentials like groceries, energy bills and rent. But because these loans have been designed to evade consumer protections that apply to other credit products, these companies aren't legally required to check if people can afford to repay them or to provide financial hardship assistance when they can't.
In September 2022, CHOICE’s nationally representative survey found that close to 1 in 3 buy now, pay later users struggled to pay buy now, pay later fees or debts. And 1 in 7 had been sold over 20 buy now, pay later loans. The only way to stop these companies from fuelling a debt disaster is to close the loopholes that allow them to evade safe lending protections to sell people into unaffordable debt.
In May 2023, the government announced that it will finally regulate buy now, pay later loans under the Credit Act. This will mean stronger protections for people, but some of the safeguards that apply to providers of other types of credit, like credit cards, are currently missing from the plan.
Under the announcement, buy now, pay later companies will need to hold a license to operate, handle disputes better, and they’ll also be required to conduct safe lending checks to make sure their loans are affordable – depending on the loan amount. But just because a loan is small, it doesn’t mean it’s safe. Many people suffering financial hardship are sold multiple small buy now, pay later loans, so we need to make sure everyone will be protected from predatory lending.
It’s time to stop companies selling people who are already doing it tough into unaffordable debt. 88% of people in Australia already agree that buy now, pay later loans should have similar consumer protections as credit cards.
But if even more people join the movement for strong regulation of buy now, pay later loans under Australian credit laws, we can show the government strong public support for closing lending loopholes for good.
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