Bravery Trust joins leading consumer groups
Buy Now, Pay Later (BNPL) late fees and charges would be capped, and providers would be licensed and banned from making unsolicited offers of credit, under recommendations for proper regulation of the sector proposed by a coalition of 15 consumer and legal groups.
Bravery Trust has joined with Financial Counselling Australia (FCA), CHOICE and consumer legal centres, lodging a submission to Treasury to tighten regulation around BNPL amid growing consumer harm and escalating cost-of-living pressures.
The group is calling for BNPL to be regulated in the same way as other credit products to stem the growing consumer harms caused by the product.
The group’s submission also calls for:
- Removal of regulatory loopholes that allow BNPL to sidestep the credit law
- BNPL providers to comply with responsible-lending obligations to curb over-commitment and ensure BNPL loans are suitable
- Banning of unsolicited limit offers that increase indebtedness (similar to laws that apply to credit cards)
- BNPL providers to be included in the credit reporting regime to provide a more complete picture of a consumer’s debts and liabilities
- Late fees and charges to be capped
The joint submission follows the release in May 2022 of an open letter calling on the new Government to regulate BNPL as conventional credit, with the same safe lending rules as other comparable forms of credit.
It was signed by 120 community groups including Bravery Trust and led by FCA following the groups’ experience of mounting cases of financial hardship fuelled by BNPL.
In July 2022, the Federal Government committed to consult on how to best regulate BNPL.
BRAVERY TRUST CEO BELINDA WILSON
“Typically, BNPL debt is being accessed by our veterans when they no longer have access to other forms of credit such as credit cards and personal loans.
“BNPL is trapping our veterans into cycles whereby automatic repayments across multiple BNPL accounts leave them with insufficient funds for basic living – and so groceries and essentials are increasingly being bought using yet another BNPL. It is not uncommon for Bravery Trust to identify upwards of six BNPL accounts for a single applicant.
“Bravery Trust often works with veterans who have trauma related diagnoses, most commonly PTSD. In addition, many of our clients experience a disconnect from their previous social support networks and loss of their sense of identity. This cohort is particularly vulnerable to using BNPL to support impulse purchases of material goods in response to their mental health needs and longing for return to a lifestyle they can no longer afford. Our veterans can be traumatised by the separation from service where they felt a sense of belonging, while also adapting to their reduced income following medical separation from the ADF.”
Bravery Trust provides financial assistance to Australian Defence Force veterans who have service-related injuries or illness and face financial hardship. Bravery Trust also provides financial counselling to any current or ex-serving veteran.
70% of those who receive financial assistance are aged 60 years or younger.
Bravery Trust BNPL case studies and observations can be found here.
FINANCIAL COUNSELLING AUSTRALIA CEO FIONA GUTHRIE
Ms Guthrie said since financial counsellors first sounded the alarm some years ago, they had seen the fallout from BNPL grow, as more and more people were lured into agreements they cannot afford.
“The numbers of people running into difficulties from BNPL have grown steadily, which is precisely why we have called for greater consumer protections.
“This year, particularly, we’ve seen people resorting to BNPL to pay for essentials as the cost of living crisis bites, but getting into strife as a result. Many of the people using BNPL are on low, and often, precarious incomes, and while the amounts people borrow may look small, they can snowball very quickly, and the impact when the debt cannot be paid is far from small.
“We’ve seen BNPL offers going from food and fashion, to products worth tens of thousands of dollars – it’s extraordinary to think they can do that without any compliance with credit laws.”
CHOICE CEO Alan Kirkland
“This is a crucial opportunity for the government to close the loopholes that allow BNPL credit providers to sell unregulated loans to people who may struggle to afford them.
“Credit is credit, and the BNPL industry should be required to follow the same rules that apply to personal loans or credit cards.
“As people face rising costs of living the last thing they need is unaffordable, unregulated debt.”
CONSUMER ACTION LAW CENTRE CEO GERARD BRODY
“The changes we are calling for will help prevent people falling into the debt spirals so typical in the aftermath of Christmas.” Mr Brody said.
“Offering credit unsolicited means that people end up indebted when they didn’t want the credit in the first place. It contributes to financial distress and has already been banned for credit cards. We urgently need to treat all consumer credit products, including BNPL, consistently, so people have the same safeguards, whoever the provider is.”
FINANCIAL RIGHTS LEGAL CENTRE
Mob Strong Debt Help Strategy Lead and Financial Counsellor, Bettina Cooper
“BNPL has the impact of increasing the Gap on First Nations communities as it allows existing debts to be hidden by buy now pay later products. Greater oversight is needed to reduce harms that we are hearing on our Mob Strong Debt Help service including increasing reliance on it to cover essentials, groceries and energy.”
CHOICE CEO Alan Kirkland
“This is a crucial opportunity for the government to close the loopholes that allow BNPL credit providers to sell unregulated loans to people who may struggle to afford them.
“Credit is credit, and the BNPL industry should be required to follow the same rules that apply to personal loans or credit cards.
“As people face rising costs of living the last thing they need is unaffordable, unregulated debt.”
CONSUMER CREDIT LEGAL CENTRE WA, PRINCIPAL SOLICITOR ROBERTA GREALISH
“Community legal centres and financial counsellors are already seeing people in deep spirals of debt propelled by these products and irresponsible lending. If we don’t see some serious regulation, this will only get worse.
“We are concerned that spiralling cost of living pressures are only going to add to the problem – we know in the sector that people prioritise these payments so that they aren’t cut off from using the platforms. They are prioritising payments over other essentials, medicine and even food. We have to protect our most vulnerable and regulate to reduce the risk of harm to consumers.”
