Rebekha Sharkie (Mayo, Centre Alliance) Share this | Hansard source

I move:

That this House:

(1) notes that:

(a) in November 2020, the Australian Securities and Investments Commission (ASIC) released a report entitled, Buy now pay later: an industry update, which set out the key observations about the Buy Now Pay Later (BNPL) industry, the experiences of consumers and recent regulatory developments;

(b) the report found that:

(i) more than 1 in 5 BNPL consumers surveyed missed a payment in the past 12 months, resulting in over $43 million in late fees for the 2018-19 financial year;

(ii) most BNPL consumers who had missed a payment had used multiple BNPL providers in the past six months;

(iii) nearly 40 per cent of BNPL consumers surveyed who had missed a payment in the past 12 months also had a payday loan or similar; and

(iv) 20 per cent of all BNPL consumers surveyed said they had cut back, or went without, essentials, like meals, to make their payments;

(c) BNPL providers have stated no more than 1 per cent of their consumers have been in financial hardship during COVID-19, and that this is inconsistent with the observations contained in the ASIC report for the 2018-19 financial year; and

(d) BNPL providers are not regulated by the National Consumer Credit Protection Act 2009 and are therefore not bound by responsible lending obligations; and

(2) calls on the Government to:

(a) respond to the report of the Senate Standing Committee on Economics entitled Credit and Financial Services Targeted at Australians at Risk of Financial Hardship tabled in the Parliament in February 2019 as a matter of urgency;

(b) introduce a bill that would amend the National Consumer Credit Protection Act 2009 to enact the recommendations of the Government's Review of Small Amount Credit Contract Laws;

(c) extend the National Consumer Credit Protection Act 2009 to BNPL providers; and

(d) ensure no changes are made to the National Consumer Credit Protection Act 2009 that would undermine or weaken responsible lending obligations as per the recommendations of Commissioner Kenneth Hayne.

The buy-now pay-later industry, I believe, is a tsunami waiting to happen. Afterpay, Zip Pay, Openpay, Payright and BrightePay are just a few of the players in the emerging buy-now pay-later sector—a sector that is not subject to the National Consumer Credit Protection Act and, therefore, not bound by responsible lending obligations. And I think that that's the real crux of the concern here.

The primary reason that the arrangements do not fall under the current definition of 'credit' in the act is because there is no interest charged. Instead, they charge the customer a late fee for any missed payments. While a late fee here or there may not seem much, we're not talking about an overdue library book. In the 2019-20 year, Afterpay earned almost $70 million in late fees, and I note that there was a 49 per cent increase on their last financial year. That's huge growth. You just have to look at the ASIC report: $4.8 million in transactions occurred in the year to June 2020. There were 1.9 million users, spending a total of $824 million.

Young people, the cohort that has suffered the highest unemployment and underemployment, are the most affected. ASIC found that, of those who missed their repayments, almost 40 per cent also held a small credit contract, such as a payday loan, and over 55 per cent had used at least two different buy-now pay-later services. In the absence—

A division having been called in the House of Representatives

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We're talking about buy-now pay-later. In the absence of reasonable and measured regulations, providers are permitted to stack debt after debt on financially vulnerable consumers like Jean. Jean sought advice from the Community Legal Centre because she was overwhelmed with her debts. Jean had a significant home loan; seven credit cards, all with high monthly repayments; a personal loan; and owed $5,000 to a buy-now pay-later provider. For several years, Jean had been in and out of work, had hardship agreements on nearly all of her credit cards and had been denied a hardship request on her personal loan. Despite all this, she received a $5,000 payment from a buy-now pay-later provider which stacked another debt onto her already very shaky financial situation. The impact goes beyond a poor credit history. It means going without food, electricity, fuel and basic everyday items. This isn't anecdotal evidence; this is borne out of the findings of the ASIC's report into the sector, which found that 20 per cent of all buy-now pay-later customers, one in five, were going without essential supplies in attempts to meet their repayments. Adam is another person. He is a young man who struggles with literacy issues and relies on a support person in his dealings with lawyers. Adam was being assisted by the Community Legal Centre in relation to responsible lending claims for a car loan and several personal loans. He was struggling to meet his repayments and became dependent on buy-now pay-later products to make ends meet. In one month, Adam's total repayments were over $500. This was untenable. His debts spiralled further out of control and he regularly uses buy-now pay-later arrangements to buy everyday essentials, such as groceries, petrol and discretionary items.

The great challenge is that the industry itself talks about a voluntary code, but that is not enough. The sector maintains that only one per cent of their customers are in financial hardship. The figure is not reflected in the ASIC report and it is not reflected in the experiences of our financial counsellors and our Community Legal Centres. There is predatory behaviour going on behind the buy-now pay-later scheme. It reminds customers. It sends them emails saying, 'Go and buy now. We'll lend you the money.' We need to act now to reduce the scarring impact on these financially vulnerable customers. I understand the government is hesitant to regulate, and I'm sure that there are many members in here who actually have shares with buy-now pay-later companies. I'm quite sure of that. That is where we are going wrong in this nation. We need to ensure that this industry runs under the same level of protections for consumers if they have a credit card. There should be no difference. We need to act and we need to act now.

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