‘Predatory behaviour’: Fears over lack of regulation around buy now pay later schemes

A Queensland mother opens up on how more shoppers than ever before are falling for “predatory behaviour”. VOTE IN OUR POLL

Supermarket shoppers are using buy now pay later gift cards to bypass restrictions, amid concerns the “predatory behaviour” of the payment schemes will bite as cost of living pressures rise.

More Queenslanders are using BNPL products as budgeting tools, with the sites allowing people to buy more luxury items than previously allowed. 

GetMyRefund financial expert Carly Woods said more consumers would be thrust into hardship by opting for a “loan” from BNPL sites without “urgent regulation”.

Ms Woods described the behaviour as “predatory” as new data from GetMyRefund revealed close to a quarter of the 1000 people surveyed had multiple BNPL accounts and more than 10 per cent had “overspent”.

Queensland mother Lana Whitbread was placed on a financial hardship plan with Afterpay after she racked up $900 on a $3000 limit.

Ms Whitbread, who now works in a supermarket, revealed more customers are buying groceries and putting them on BNPL gift cards. 

“It’s addictive because it’s so easy to do … I call Afterpay my fake money and the money in the bank my real money,” she said.

“You get yourself into debt because the convenience adds up … the more you pay, the more your limit increases … its dangerous.”

QUT consumer behaviour expert Professor Gary Mortimer

Supermarket giants Woolworths and Coles both confirmed a recent growth in digital gift card sales.

But Queensland University of Technology retail expert Dr Gary Mortimer said buy now pay later products ignore “other financial obligations”. 

“If you use these products responsibly, it’s a great way to avoid paying credit card interest fees … but I would certainly caution consumers about using buy now pay later products,” he said.   

Asked about credit limits that increase with proven on-time payment, Dr Mortimer said “the problem with that approach is that things can go wrong pretty quickly in that maybe you’ve just been a $2000 limit and suddenly your car breaks down or maybe you have to pay bond to get out of a lease.    

“With a bank credit card you can always apply for a bigger limit and obviously the bank will take a very close look at your other financial obligations before providing that limit increase.”

But Dr Mortimer said supermarkets would not be aware of how customer’s “accrue” money.

“All customers are doing is tapping and going,” he said. 

Asked about BNPL gift cards, Dr Mortimer said “Times are tough … It’s disappointing to hear that shoppers are now having to consider buy now pay later products to simply put food on the table”.

A Woolworths spokeswoman said: “In line with customer feedback, we have introduced ‘PayPal’ including PayPal Pay in 4, for gift card purchases on the Woolworths website.”

It is understood PayPal gift cards can be purchased between the value of $30 and $1500.

Meanwhile a Coles spokeswoman said: “While we have a range of gift cards available to help customers with a gifting solution while in store, some savvy shoppers have told us they use gift cards as a way to budget and put money aside for their weekly shop”.

It is understood Coles gift cards are sold through buy now pay later sites such as Afterpay. 

Zip Co Chief Operating Officer in ANZ Chris Patrick said: “Customers have access to Tap & Zip — a virtual Visa card accessed via the Apple or Google pay wallet which allows customers to shop anywhere in-store that Visa is accepted”.

“Many Zip customers use this feature for everyday spending (including at supermarkets) to avoid credit card interest … we conduct credit checks on all customers and as result we have 0.1 per cent of customers that request financial hardship assistance,” he said.

An Afterpay spokesman said: “Unlike a credit card, Afterpay doesn’t provide customers with a high upfront spending limit. We start customers on low limits — at around $600 — and we require customers to make their first repayment upfront”.

“Customers can purchase gift cards with Afterpay, though we apply greater scrutiny on these purchases, with limitations on which customers can purchase gift cards based on a number of factors including time with Afterpay, repayment history and more,” he said. 

“The average BNPL transaction in FY21 was $151, with users making an average of 16.6 BNPL transactions in that year,” according to the Australian Finance Industry Association. 

Originally published as ‘Predatory behaviour’: Fears over lack of regulation around buy now pay later schemes