Warning on debt surge by Afterpay
CONSUMERS are being warned not get themselves in over their heads with a new payment plan system.
Afterpay, a system that allows consumers, more than one million in Australia, to buy and receive goods and pay them off in eight equal payments has exploded in popularity. There are 7200 retailers on the Afterpay platform including Jetstar, Myer, Officeworks, and Toys’R’Us. The company has spruiked itself as a modern layby system and a champion of responsible spending.
But South Australia’s largest welfare lobby has warned consumers not to spend money they don’t have. SA Council of Social Services chief executive Ross Womersley said: “It is just another means to get people access to credit when they may not have the means to find the money.”
“It is another way of spending money that you do not have. Australian households have the highest debts that they have ever had and this process invites you to take on another debt,” he said.
But Stefanie Menezes, of consumer advocate group Choice, said Afterpay was better than some other options. “Afterpay is a preferable service to payday loans because no interest is charged,” she said. “This means you could pay off a $100 pair of jeans over eight weeks without paying anything extra. There are strict fees, however, for missing a repayment.”
AfterPay’s website shows customers can be charged $10 each time instalments are not honoured and $7 seven days after the payment is due if it is still unpaid. Afterpay executive director David Hancock said Afterpay used comprehensive repayment assessment technology at the time of purchase. “Retailers on the Afterpay platform provide a limit per transaction and average orders around $150-$200, which is really aimed at providing customers a budgeting tool to spread out payments,” he said.