Australians wanting to use a “buy now, pay later” service like Afterpay or Zippay could soon require a thorough financial check similar to getting a credit card.
It’s one way the federal government is considering an overhaul of the system in order to protect customers from getting into “debt spirals” as a result of the interest-free credit system that has little checks and balances in place.
Finance Minister Katy Gallagher said some people were getting into “serious trouble” with their accounts due to a lack of guard rails.
“People are starting to see it as a credit card, (so we’re looking at) whether or not it should be included under the Credit Code to give people some protections and also put some responsibility back on the providers about ensuring what people are able to afford to get into the contracts that they’re entering in to,” she told ABC News.
Financial Services Minister Stephen Jones said the payment method was operating outside of “normal” credit laws and landing “a lot of people into hot water”.
He said at minimum, the government was considering putting in place credit checks.
“The number that surprised me, there’s only seven million buy now, pay later accounts in Australia – most of them for people between the ages of 20 and 35. The thing is, though, a lot of people have got not one, not two but three or four accounts,” Mr Jones told the Nine Network.
“It appears that there is a small percentage of the market where people are getting into hot water.”
The credit checks being considered for would-be account holders would be similar to what is needed to get a credit card where companies perform the checks.
Another option is to have stronger self-regulation by the industry as well as a new “affordability test”.
He said he wanted a solution by this time next year.
“We don’t want to see people in the same situation they were in the bad old days of the credit card where they might have had seven or eight credit cards, no one company knew the other had one, and this person was simply unable to pay off their debts and they were in a credit downward spiral,” he said.
“We want people to have access to these great products, but we want to ensure that there’s proper guard rails in place.”