Businesses welcome Afterpay inquiry: Should ‘buy-now-pay-later’ be regulated?
Afterpay has had a tumultuous week as some of its clients welcome an inquiry that will cover its business.
An impending Senate inquiry will examine whether Afterpay should be treated as a lender and regulated under national consumer credit protections, and has been welcomed by several of the company’s clients.
The fast-growing buy-now-pay-later platform has had a tumultuous week after the Senate agreed on Wednesday to look into a range of non-bank lenders amid concern regulation has not kept up with the sector.
Afterpay welcomed the opportunity to participate in the industry review in a statement released to the ASX yesterday. It has, however, changed its previous position by backing a move for ASIC to expand its National Credit Code.
“Afterpay recognised that the provision of such a power to ASIC would promote higher levels of consumer trust in newer services,” the company said, referencing an August submission to the Senate Economics Committee.
Afterpay doesn’t charge interest. Instead, it generates revenue from commission paid by merchants, which has helped it stay outside of the credit code’s remit.
Labor Senator Jenny McAllister, who moved the Senate motion earlier this week, said the inquiry would consider whether consumer protections in the buy-now-pay-later space were adequate.
Afterpay merchants SmartCompany spoke to were supportive of the inquiry.
“It’s probably a good thing, services like this need to be regulated,” Hunting for George’s sales manager Jonno Rodd tells SmartCompany.
Rodd says Afterpay has driven a “fair chunk” of customers to Hunting for George since it signed up, but the business has been wary of the platform.
“On our Afterpay page we ask everyone to consider whether its right for them and provide information,” he says.
“It was a concern to us at the start, we weren’t an early adopter.”
Nathan Huppatz, the founder of e-commerce business costumes.com.au, says Afterpay has become a bit of a victim of its own success.
“In Australia, at the moment there are two Facebook groups about Afterpay which have more than 100,000 users each,” he tells SmartCompany.
“They’ve done a great job of bringing the model into the market and obviously with the way it’s set up there are some people who don’t make payments.”
Consumer advocates have been particularly supportive of an inquiry, expressing concern some shoppers are becoming laden with debt by using buy-now-pay-later services.
Consumer Action Law Centre’s Katherine Temple called on Afterpay to be brought under responsible lending laws on Thursday.
Huppatz says his understanding is Afterpay is “doing a good job” of checking customers and the vast majority of users haven’t run into trouble with the platform.
“We see quite a few knockbacks that come through in our system … not everyone that tries to use it goes through the first time,” he says.
Huppatz doesn’t think the inquiry will temper demand for the platform, which he says has driven a significant amount of business for him in recent years.
However, he concedes if the platform is forced to tighten up its policies, it could have an effect.
“I wouldn’t expect much to come of [the Senate inquiry] … but if someone like Afterpay has to tighten up their checks, then yes, that could have an impact,” he says.
If Afterpay was brought under responsible lending laws it would have to conduct additional checks, including verifying income and expenses of customers, while also taking part in a dispute resolution scheme.
