Financial counsellors warn Afterpay Plus will trap more vulnerable borrowers in debt

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Financial counsellors warn Afterpay’s new $10 per month subscription scheme will trap more vulnerable spenders in debt.

Afterpay Plus allows shoppers to borrow money through Apple Pay, Google Pay, or Samsung Pay with the tap of a card or phone.

It allows shoppers to buy now, pay later even in shops that don’t support Afterpay.

Financial Counselling Australia chief executive Fiona Guthrie said it was an alarming idea which could tempt desperate people struggling to afford the cost of living.

Ms Guthrie said schemes such as Afterpay already offered easy access to unregulated credit, and the subscription model would make access even easier.

She said Afterpay Plus had virtually no affordability checks or safeguards to protect borrowers from financial ruin.

“We already know buy now, pay later as an unregulated credit product is too easy to get, so we’re concerned this will mean more people will find themselves getting in over their head,” she said.

“Credit is not the answer to financial difficulty, it only makes it worse.”

‘Debt trap’

Consumer Action Law Centre chief executive Stephanie Tonkin said buy-now-pay-later apps were exploiting legal loopholes to evade regulation.

Ms Tonkin said it came at a time when the bare essentials were becoming increasingly less affordable.

“I am really concerned, as our financial counsellors on the National Debt Helpline often hear from people using buy now, pay later for daily essentials like food, energy, and telco services,” Ms Tonkin said.

“Let’s not forget, these are credit products with little or no regulation, and people shouldn’t have to pay a monthly fee on top.”

Financial Rights Legal Centre CEO Karen Cox said Afterpay Plus was a “frictionless, poorly regulated” recipe for debt.

“We are starting to see consumers looking at insolvency options with BNPL debts,” Ms Cox said.

“As the cost-of-living crisis continues to bite, the lure of these products becomes even stronger – but they are not a real solution.”

Mob Strong Debt Help financial counsellor Bettina Cooper described Afterpay’s move as another scheme which would “capture our youth and most vulnerable in a debt trap”.

“This expansion of Afterpay will only hasten the growing mountain of debt for the asset-poor,” she said.

“We continue to consider regulations for the 80 per cent and leave the 20 per cent in harm’s way, allowing poorly regulated finance companies to profit from the 20 per cent who can least afford it.”

‘Safer’ alternative

An Afterpay spokesperson said Afterpay Plus maintained rigorous consumer protections to safeguard its users.

The spokesperson said Afterpay Plus was a safer, interest-free alternative to credit cards.

They said 95 per cent of all Afterpay instalments were paid on time as of Q2 this year and 98 per cent of all purchases incurred no late fees.

“This is in stark contrast to the credit card industry, which benefits from customers not paying their balance in full and revolving in long-term debt,” they said.

(Original ABC Article)