Afterpay has revised its late fee structure for all purchases under $40. This comes on the heels of consumer groups who have been vocal, demanding that buy now, pay later (BNPL) providers be subject under the same regulations as credit card companies.
Skepticism has surrounded BNPL firms since day one, as many have allegedly been operating outside of any regulatory framework. Since there has been no evidence of BNPLs drafting their own code of practice, critics have been left to assume that perhaps these companies conduct their businesses in a way where vulnerable consumers can fall prey to their lending practices.
In 2020, The Australian Securities and Investments Commission (ASIC) released a report that found that one in six users had become overdrawn, had delayed bill payments, or borrowed additional money due to a BNPL arrangement.
Consumer research also revealed some impacts felt by consumers using BNPL. One in five reported going without meals in order to make their payments on time.
With regulators hot on their heels, Afterpay has conceded and announced that late fees for orders under $40 will be limited to 25% of the total order value. Therefore, under this new late fee structure, the maximum late fee for these orders will be $10.
In an email, Afterpay said: “A $20 order with four $5 installments will only ever incur a $5 late fee.”
These changes will go into effect starting June 19.
Afterpay does not charge interest and therefore falls outside the scope of The Credit Act. The Credit Act requires that traditional lenders perform responsible lending checks and other appropriate lending assessments before they approve consumers for a loan.
As such, BNPL providers do not have to abide by this regulation.
In November 2022, the Australian government requested submissions for feedback on a regulatory framework for BNPL products.
While regulation solutions have been proposed, nothing has been determined yet. As of this writing Australia remains without BNPL regulation.
