There are a lot of times throughout the year where we all experience financial stress, whether it's the start of a school year, mid-year sales, extra periods where we've just got to pay our bills, or even coming into Christmas. And there is a really strong temptation to use those Buy Now Pay Later schemes.
We're having a chat today to one of Legal Aid’s consumer advocates, Paul Holmes about Buy Now Pay Later and what's it all about and what are some of the pitfalls.
So Paul, let's just start with what is Buy Now Pay Later – isn’t it just a lay-by?
Paul: So, Buy Now Pay Later is actually a bit different to a lay-by. I know in the shops it's marketed as being an alternative to a lay-by, but in reality, it's very different. And the reason is this; Buy Now Pay Later is a scheme that allows you to obtain goods from a shop, or services from a shop without immediately having to pay for them – you take the goods away and you pay the amount back in fortnightly payments. The difference is [with] a lay-by, you didn't get those until you fully paid for them.
Who would use it the most?
Paul: In our experience, we see a couple of groups who use it the most - one is young women who spend a lot of money using Buy Now Pay Later in clothing stores. They get the instant gratification of being able to get that latest style immediately and then pay it back at a later date. Another group, we've seen use it a lot recently are young families who are using it to pay for basic expenses, or are using it to fund the return to school expenses.
I guess there's the rub, isn't it? Because you've just come off the back of Christmas. You're trying to pay for school products, which have a set deadline don’t they?
Paul: Absolutely. And there is actually research released in The Courier mail which suggested that in Queensland the average Buy Now Pay Later debt that Queenslanders have has actually dramatically increased in the last year.
So why do people use Buy Now Pay Later?
Paul: I think there's a couple of reasons. One is the instant gratification that you can get whatever it is you need now without necessarily having all of the money that you would otherwise need to buy the good using another form of credit or loan. And I think the other thing is Buy Now Pay Later does not have the same legal requirements, placed on it as other credit products when it comes to assessing your ability to successfully repay a loan without such.
You've seen some pretty crazy examples of Buy Now Pay Later, haven't you?
Paul: Yes. My favourite one was coffee and the prospect of being able to Buy Now Pay Later a coffee, which depending on where you go, is, what somewhere between five and ten bucks. You were paying this particular product back at I think it was at $1.75 a week.
What other things can you buy?
Paul: I've seen dental surgery, I saw recently a report of beauty treatments and I haven't seen this yet, but somebody suggested to me plastic surgery on Buy Now Pay Later and then there's your run-of-the-mill services that you see in shops; hairdressing is a common one. If you look on eBay there is a Buy Now Pay Later option now offered on eBay.
So pretty much it's everywhere through our society now.
Paul: It has made it pretty much everywhere in our society.
There've got to be some pitfalls here.
Paul: One of the attractions Buy Now Pay Later uses to market itself is they say there's no interest charged and that differentiates, it say from a credit card, or a personal loan. But the sting in the tail, we find for a lot of our clients who will end up with five, six, seven different Buy Now Pay Laters they're paying back is that if you miss a payment there [are] late fees. And in some buy now pay later schemes there are other fees such as administration fees or account keeping fees that are charged each month. And when you add all those up, they can add up to substantial additional fees in some cases.
March 2021 saw a new code of conduct introduced to try to counter some of the issues that everyday people experience dealing with Buy Now Pay Later products. What does this code mean for these people?
Paul: Industry codes are quite common across all industries and they aim to provide consumers with a complaint mechanism that they can use to complain when companies in that industry aren’t doing the right thing. Typically, in our experience, we see industry codes, like this one work really, really well when they work in conjunction with legislative regulation as well. In this particular instance, it remains to be seen how effective the Buy Now Pay Later code is. We obviously hope that it will provide effective remedies for consumers who are experiencing financial hardship and those other associated issues that come with being overextended with Buy Now Pay Later products.
So on that topic, what can people do if they are in trouble with their Buy Now Pay Later products?
Paul: First Port of Call, I would suggest is talking to ourselves at Legal Aid Queensland on 1300 65 11 88, and also talking to a financial counsellor who you can get in contact with on 1800 007 007, and both of us can talk you through how to approach your Buy Now Pay Later providers and what you can reasonably ask for under the existing legislation and this new code that's been introduced.
Okay, there you have it. So if you're experiencing issues with Buy Now Pay Later or have other debt related issues, you can get help through Legal Aid Queensland on 1300 65 11 88, or through the National Debt Helpline on 1800 007 007, or jump on to Legal Aid Queensland's website www.legalaid.qld.gov.au for more information.