Buy Now, Pay Later, Schemes Are Increasingly Becoming a Means of Financial Abuse, Report Says | Buy now, pay later

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It all started with Afterpay, says Phoebe*.

For four years, her former partner forced her to open 12 buy-now, pay-later accounts with different vendors, which he used to rack up more than $5,000 in debt on her behalf.

She said she tried to confront him about the debt, but had to be cautious due to the violence in the relationship.

“The minute I said anything, he got aggressive,” she said.

According to a report by Good Shepherd, a charity that supports women and girls who experience abuse and disadvantage, buy-it-now, pay-later (BNPL) programs have increasingly become a source of financial exploitation. because of the ease with which it is possible to open accounts.

A quarter of the 30 financial advisers surveyed said that at least half of the women seeking help had been forced into debt with the BNPL. And more than half said it has become more common than a year ago.

“We hear stories of customer service they want [the partner] could be stopped, that it was not possible to open one after the other, that someone would say no, ”said Dr Ros Russell, of Good Shepherd.

Phoebe, a mother of two, said she was living on income support payments of around $1,100 a fortnight at the time of the abuse.

She said she had a bad credit history after her partner forced her to get a credit card as a young adult.

“I don’t think I have a clean credit history at all, but yet I’ve still been approved for each of these purchases now, pay later [services]“, said Phoebe.

She said provider BNPL Zip increased her credit limit from $1,000 to $2,500 after her partner forced her to apply.

She said her partner used the programs for everyday consumer goods such as gas, groceries and cigarettes.

Because so much money was flowing out of her account to repay what he had borrowed in her name, she also had to use the schemes to afford the essentials.

“I used Afterpay to get Coles and Woolworths gift vouchers so I could go shopping because I was drowning in so much debt,” she said.

The report found that 84% of respondents said clients indebted to BNPL had tried to manage the debt by opening more BNPL accounts. Almost three-quarters said customers had missed essential payments, or reduced or waived essentials to enable repayment of BNPL’s debt.

After Phoebe approached Good Shepherd for help with her debt, she wrote to the companies to explain her situation. All but one have now forgiven their debt.

“We didn’t actually ask for it to be erased, but they did,” she said.

The report says BNPL schemes exploit financial vulnerability, but also close gaps in social protection by supplementing low benefits.

Several welfare recipients told Guardian Australia they had used BNPL’s services to buy groceries, medicine and clothes. This had become more common as the cost of living rose.

The report recommends increased income support payments and the payment to escape domestic violence as well as stricter regulation of BNPL services.

A Zip spokesperson said it performs credit and identity checks on all applicants, as well as bank links that flag whether a client is in debt with other BNPL suppliers. The company has also worked with Good Shepherd to strengthen its family and domestic support policy and to train staff to identify any issues.

“Because the checks we run are compliant or, in some cases, stronger than other forms of credit, we don’t see high account opening rates as evidence of financial abuse,” said one. spokesperson.

A spokesperson for Afterpay said it does not tolerate any form of financial abuse and has taken a number of steps to limit customers’ exposure to potential financial vulnerability.

Afterpay does not perform credit checks, but has a policy of freezing a customer’s account as soon as a payment is missed, and undertakes an assessment of fraud and the customer’s ability to make refunds each time purchase. A spokesperson said these standards go beyond traditional credit products.

“It is important to note that BNPL can be used as an umbrella term for a multitude of providers with very different offerings. Afterpay’s model is very unique and differentiated in this group, the spokesperson said.

Zip and Afterpay have adopted the Buy Now Pay Later voluntary code of practice which provides a standard of consumer protection, but a number of BNPL services have not signed it.

* The name has been changed for legal reasons

In Australia, the National Domestic Violence Advice Service is on 1800 737 732. In the UK, call the National Domestic Violence Helpline on 0808 2000 247, or visit Women’s Aid. In the United States, the domestic violence hotline is 1-800-799-SAFE (7233). Other international helplines can be found via www.befrienders.org.


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