The expansion of Afterpay and other buy-now-pay-later products into pubs and restaurants could lead to bigger debts for people already struggling financially, consumer advocates warn.
Concerns were raised last week after news that pub giant Australian Venue Co had partnered with buy-now-pay-later (BNPL) monolith Afterpay to roll out the facility in the 160-plus venues it operates nationally.
Afterpay and other similar products like Zip Pay and PayPal have been available in retail outlets for some time but the latest development heralds the arrival of the biggest BNPL provider into the Australian hospitality industry.
Katherine Temple, the director of policy and campaigns at the Consumer Action Law Centre, said her organisation was already working with an increasing number of people struggling with BNPL debts.
“Often people are struggling with buy-now-pay-later debts on top of existing debts: credit cards, personal loans, even utility bills. So it can be a very complex debt situation that people are experiencing,” Temple told Guardian Australia.
The move to offer Afterpay and other BNPL options in pubs and restaurants was “a really concerning development”, she said, especially given the approach of the festive season.
“We’ll see a lot of people in January with a lot of buy-now-pay-later debt that they need to pay off, whether for Christmas presents or going out over the Christmas period,” Temple said.
“My fear is that that will be on top of credit cards and other kinds of credit – and that’s going to exacerbate financial hardship for people.”
Because BNPL debts don’t accumulate interest in the way a credit card or bank loan does (there are late payment fees instead), companies are not subject to the same regulatory requirements regarding responsible lending.
“There are so many players operating in the space and they exist in a regulatory void,” Temple said.
“These companies aren’t doing proper affordability checks, and these products can really exacerbate money problems. They aren’t free, especially if you don’t pay on time. Some of them might have some good safeguards in place but then there are 10 more that don’t. There’s no consistency.”
James Hunt, the campaign director of Financial Counselling Australia, said: “It’s like the wild west without a sheriff. The law is not keeping up with the pace of innovation in our lending markets.”
Financial Counselling Australia was seeing more and more people relying on BNPL products to pay for essentials such as groceries, Hunt said. Those suffering from a debt spiral had often opened accounts with multiple BNPL companies.
Hunt and Temple both called on the federal government to close the regulatory gap to ensure consumers have a safety net when they use BNPL products.
“We totally understand why people would be using these products when you can’t afford food,” said Hunt. “But you don’t have consumer protection like you do with credit cards or personal loans. These companies don’t have the same hardship practices in place. We’re seeing more people becoming overcommitted.”
Australian Venue Co told Guardian Australia the company was introducing Afterpay due to customer demand.
It is against the law for gambling providers to offer forms of credit to punters, but the regulatory grey area in which BNPL companies operate – and the expansion into venues with poker machines or other forms of betting – has raised questions about its potential to exacerbate gambling problems.
Afterpay would only be available on food and beverage purchases at Australian Venue Co’s venues, and not for any purchases in gaming rooms or any area where wagering takes place, or any venues that did not serve food, the spokesperson said.
Afterpay said its product was limited to dining and hospitality.
“Unlike credit cards, Afterpay cannot be used for any type of gambling service,” a spokesperson said. “Responsible spending rules are built into our product, which ensure that customers never pay interest or revolve in debt. Customers are unable to continue using Afterpay if they are late on a single instalment.”
Australian Venue Co expects to offer Afterpay as a payment option by the end of this week.
