Consumer advocates have sounded the alarm that buy now, pay later providers’ push to offer money to Australian renters could “cause problems” and further add to spiralling debt issues.
There have already been concerns about the sector’s recent move into the pub sector and in the space of women’s beauty, cosmetics, and fashion. Now, these new players are pushing their service for renters, including Tenanting, which offers to “instantly” pay rent on a person’s behalf. The person must then pay it over four instalments – but with an additional 5%.
Gerard Brody, chief executive of Consumer Action Law Centre, described the move as “highly irresponsible.”
“Rent is one of the essential costs that you have to pay every week, so to go into debt to pay it, it’s not a helpful way to resolve that cost, as you just have to pay it again the following fortnight when the repayments are due,” Brody told news.com.au. “For people needing to rely on a loan if they are finding the cost of rental payments difficult, this is not a solution and it’s not smoothing the costs out, but it’s going to create more expenses down the track.”
The 5% additional charge from Tenanting means someone who is paying a $515 a week on a typical two-bedroom apartment in Greater Sydney would need to pay $25.75 more a week.
Another provider, RentPay, offers a so-called SafetyNet service where people can access a week’s worth of rent, which they can pay back in four instalments – but with an extra $15 charge for every missed payment.
Brody said that with the BNPL sector remaining unregulated, it meant “providers don’t have to be licensed” and “don’t have to meet standards like responsible lending obligations, which require them to assess that a loan is suitable and repayments won’t cause substantial hardships.”
Another big issue Brody noted was that the BNPL service was sold as a “frictionless, easy and convenient” way to pay rather than a loan, which makes it more difficult for people to handle money.
“So it’s becoming a bigger problem,” Brody told news.com.au. “I think that what tends to happen is because these lenders don’t have to abide by responsible lending laws, they don’t assess the full financial situation of people, and don’t necessarily know they have other debts and might struggle with this particular product.”
Financial Counselling Australia has called on the government to commission an independent review into these financial products and the lack of regulation, news.com.au reported.
