Afterpay vow action to close loopholes
THE nation’s biggest buy now, pay later juggernaut is grappling with fraudulent transactions and working to shut loopholes allowing cashstrapped Australians to buy goods.
Afterpay – which turns over $2.4 billion in sales annually – is booming and now has more than 14,000 retailers on its platform and more than 1.8 million customers.
But the company has been in damage control after a series of public embarrassments including a recent case where a child slipped through the cracks and was able to successfully order champagne using Afterpay.
Despite this the company rejects about 50 per cent of all new applicants who try and sign up to the service.
Afterpay’s group head David Hancock said regardless of the company not doing any formal credit checks on customers they were working hard to put more stringent processes in place to stamp out this type of behaviour.
“Clearly there are some things that we are trying to improve and we are systematically rolling that out and this should be completed by the end of financial year,’’ he said.
“We have tightened up a number of other things, once fraud was discovered it was a good opportunity to see what we can do.”
But consumer group Choice’s spokesman Tom Godfrey warned these schemes can quickly get customers into hot water.
“It’s simply just another line of credit that on top of credit card debts, a mortgage and living expenses can push already cash strapped people over the edge,’’ he said.
The financial regulator, the Australian Securities and Investments Commission, has shone the light on these buy now, pay later schemes and will prepare a report to be released later this year.
Of those using Afterpay – an interest-free way to pay for goods – about 22 per cent of customers get stung with late fees.
Late fees start at a $10 fee and an additional $7 is charged if the repayment remains unpaid seven days after the due date.
Zippay is also another popular buy now, pay later scheme which involves customers applying for a line of credit.
But Consumer Action Law Centre’s chief executive officer Gerard Brody said the big problem with Afterpay is that it’s not required to abide by responsible lending obligations – they fall out of this loophole. “The late fees are also an issue, it’s 20 per cent of their revenue,” he said.