The Commissioner for Consumer Protection, Lanie Chopping has published a blog raising the possibility that the COVID-19 lockdown could change the way people shop forever.
“Cash transactions have plummeted in favour of a number of contactless payment methods, including buy-now-pay-later schemes,” Ms Chopping said.
“Often described as the modern day lay-by, buy-now-pay-later arrangements allow you to receive goods and then pay off the amount in instalments further down the track. Unlike lay-by, the item is available to you straight away.”
She said that at the height of the pandemic the prominent buy-now-pay later business Afterpay picked-up one million new users and recorded its best-ever quarter to June with $2 billion spent on buying goods and services.
“While Afterpay is the most dominant force in the market, its rivals include a growing number of similar platforms such as zipPay, BrightePay, Payright and Openpay,” Ms Chopping said.
“Is it a good idea?” she asks.
“The key advice is to check the terms and conditions before you sign up to any scheme. They are often promoted as ‘interest-free’ but late fees, account-keeping fees or payment processing fees may apply.”
She gave the example of a purchase of $100, were one late payment could cost up to a further $17 plus any potential bank fee for a payment default.
“A review by the Australian Securities and Investment Commission (ASIC) in 2018 found that one in six buy-now-pay-later users had become overdrawn, delayed bill payments or borrowed additional money,” Ms Chopping said.
“Most consumers reported an option that allowed them to buy more expensive items and generally spend more than they normally would,” she said.
The Commissioner urged consumers to plan ahead to ensure the repayments fitted their budget and other financial commitments, and to link their buy-now-pay-later account to their debit card rather than their credit card.
The full text of her blog can be accessed on this PS News link.
