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HomeNewsASIC, AFCA back stronger regulations for BNPL industry as 4000 complaints lodged

ASIC, AFCA back stronger regulations for BNPL industry as 4000 complaints lodged

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An Australian financial authority has torn into the buy now pay later sector for failing to help customers, especially vulnerable ones, and also not adequately assisting those who have been scammed through the service.

In a submission to the Treasury inquiry into the BNPL industry, the Australian Financial Complaints Authority (AFCA) revealed that they had received nearly 4000 complaints about the unregulated companies operating in Australia.

Since 2018, there have been 3,387 complaints made against BNPL providers, according to their submission.

The number one concern among customers was about the quality of the service.

The second most complained about element of using BNPL carriers was racking up charges for unauthorised transactions and not receiving a refund.

And in another worrying revelation, pleas for help from vulnerable customers drowning in debts were also largely ignored by the companies.

“AFCA is concerned that failure to respond to requests for financial assistance has featured as one of the top issues in BNPL complaints in recent years,” they wrote in their submission.

“Consumers making these requests generally require prompt responses.”

AFCA also noted that these complaints were expected to be much lower than the total number of unsatisfied customers, because the lack of regulation made it harder for complainants to pin down what had been breached.

They also noted that buy now pay later companies are not required to be a member of AFCA, which means many of these firms are not under their remit.

The Australian authority criticised the fact that this industry had “less onerous obligations” than other financial services like credit lenders and banks.

AFCA pointed out that during the four-year period it was reporting on, “the use of BNPL increased greatly”.

Australia’s corporate regulator also lodged a scathing review of unregulated the BNPL industry, calling for much stronger restrictions and oversight.

“Products with similar characteristics and the same purpose and function should be treated the same way in the regulatory framework,” the filing from the Australian Securities and Investments Commission (ASIC) read.

“Uniform regulation under the National Credit Act would bring a more consistent regulatory framework across all buy now, pay later providers and a standardised regime that could be enforced by ASIC.”

Last year, Financial Services Minister Stephen Jones said buy now pay later businesses were operating outside of “normal” credit laws and landing “a lot of people into hot water”.

It prompted the Albanese government to start a submission process to crack down on the BNPL operators across Australia.

Use of the services could soon require a thorough financial check similar to getting a credit card.

BNPL provider collapses

The submissions, lodged this week, come just a few days after a BNPL company collapsed, sending shockwaves through the sector.

On February 7, Australian firm OpenPay became the first ASX-listed BNPL firm to go into administration.

OpenPay had been struggling for some time, with ASIC documents showing it had not turned a single profit since its debut on the Australian stock market in 2019.

Its latest quarterly report showed that the company had racked up $18.2 million in operating losses.

Other BNPL services such as Zip and Afterpay have also had profitability issues.

Afterpay has since merged with US company Square.

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