Afterpay announces changes for Australians

Afterpay will introduce a spending limit later this year.

The Buy Now, Pay Later service announced the change via emails to customers on Tuesday morning.

‘This feature will launch later in 2024. When available, you’ll be able to set a limit on what you can spend with Afterpay with a few simple taps in the app.’

Afterpay users can create an account without an external credit check. Furthermore, using the platform does not affect their credit score.

Initially, customers will be given a borrowing limit of $600, which can increase as they continue to use the service

‘The longer you are a responsible shopper with Afterpay, and therefore make all payments on time, the greater the chance that the amount you can spend will increase,’ the website says.

Meanwhile, the Australian government is set to take tougher action against ‘buy now, pay later’ services, with new laws being proposed in parliament.

According to the government, BNPL providers are not adequately regulated by Australia’s consumer credit laws, meaning the companies are not subject to affordability checks, such as those required to obtain credit cards or loans.

The Australian Securities and Investment Commission has said that while the loan arrangements can be beneficial, it “is aware that some consumers incur costs for missing payments and report financial hardship.”

The bill, “Buy Responsibly, Pay Now, Later and Other Measures,” was introduced on Wednesday by Assistant Treasurer Stephen Jones.

“Our approach to better regulating BNPL strikes the right balance between preserving the benefits of access to cheap credit and addressing the risks of consumer harm,” Jones said.

The new law also imposes rate caps on BNPL companies.

“This legislation regulates BNPL in a proportionate way that provides necessary consumer protections while preserving its essential benefits,” Jones said.

‘This does not change the underlying obligation not to provide credit unless it is affordable and meets the consumer’s needs.’

According to recent research by Finder, 20 percent of BNPL users had paid a late payment penalty in March this year, up from just five percent in 2020.

Graham Cooke, head of consumer research at Finder, warned Australians to be informed about the risks of products like Afterpay and not to use them too often.

“Responsible use of BNPL services requires careful budgeting. Users should not rely on it for everyday expenses,” he said.

“While it offers convenience, it is not without risk. Overspending, late payments and potential debt accumulation are risks.”