Australia's Afterpay says some BNPL users told to close accounts, then sold credit cards
By Byron Kaye
SYDNEY (Reuters) -Some customers of Australia's Afterpay have been asked to close buy-now-pay-later accounts to qualify for a mortgage and offered a credit card upon qualification, the BNPL provider said on Tuesday, underscoring fierce competition in the consumer finance sub-sectors.
BNPL loans, on-the-spot interest-free short-term loans with minimal credit checks, exploded as an alternative for younger shoppers after the COVID-19 lockdowns and stimulus payments spurred an online shopping frenzy. Customers are incentivised to pay on time by the promise of maintaining or increasing their borrowing limit.
In a survey of 1,000 of its customers, Afterpay said more than 10% reported being offered a credit card by the same bank or mortgage broker that told them to close their BNPL account to qualify for a loan, without specifying which banks or brokers.
Owned by U.S. tech billionaire Jack Dorsey's Block, Afterpay leads Australia's BNPL market with more than 3.5 million active monthly users, half the country's total BNPL accounts, according to government figures.
Lenders are required by law to make reasonable inquiries about an applicant's finances but may not give financial advice.
Spokespeople for Commonwealth Bank of Australia, the biggest lender, and No.3 lender National Australia Bank told Reuters that they did not tell applicants to close their BNPL accounts.
A spokesperson for No.4 lender ANZ said the bank assessed BNPL liabilities alongside a person's other finances and "depending on the customer's overall financial position, goals, and objectives, they may choose to restructure or close certain debts – such as BNPL accounts – to support their application".
TO RISK OR NOT TO RISK
Afterpay claimed banks were capitalising on a perception of BNPL users as riskier than traditional borrowers to protect a declining lending category.
Australian interest-accruing credit card debt is down 30% in half a decade as borrowers seek cheaper options.
The company added that its survey found BNPL users had credit scores and on-time repayment records broadly in line with credit card users.
The BNPL model has avoided regulation under Australian consumer credit laws so far as it doesn't involve interest. However, "if it looks and acts like credit, then it should be regulated as such," the Australian government had said last year.
New legislation requiring BNPL firms to run credit checks on borrowers kicks in on Tuesday, which, Afterpay's Head of Public Policy Michael Saadat hopes, would improve transparency around user creditworthiness.
The main reason Afterpay customers close their accounts is because their lender or broker told them to, and "this should not be something that is driven by misperception of the regulatory requirements," Saadat told Reuters in an interview.
According to mortgage broker AFG, one in 10 Australian mortgages are arranged by brokers. Mark Hewitt, general manager of industry and partnerships at AFG, said the company does not distribute credit cards but responsible lending rules require it to "ensure adequate enquiry is made around an applicant's ability to meet their financial commitments".
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
16 minutes ago
- Yahoo
Trump FAA nominee says agency faces serious leadership, trust issues
By David Shepardson WASHINGTON (Reuters) - U.S. President Donald Trump's nominee to head the Federal Aviation Administration says the agency faces serious leadership, trust and culture issues, according to a Senate questionnaire seen by Reuters. The Senate Commerce Committee will hold a hearing on Wednesday on Trump's nomination of Republic Airways CEO Bryan Bedford to head the FAA. The FAA has come under scrutiny after a series of safety incidents, especially a January 29 mid-air collision between an American Airlines regional jet and U.S. Army helicopter that killed 67 people. "The lack of steady and qualified leadership helps to explain the lack of any coherent strategy or vision for the agency," Bedford wrote in the questionnaire reviewed by Reuters. "A malaise has set in whereby managers believe the agency is helpless to make the necessary changes, and furthermore, they rationalize it isn't really their fault." Bedford, a pilot and industry veteran of more than 30 years, was nominated in March. He previously headed two other carriers and oversaw a significant expansion of Republic Airways, which operates regional flights for American Airlines United Airlines and Delta Air Lines. Bedford said there was a profound lack of trust with and within the FAA. He described the agency's organizational structure as "unwieldy" and said there was a need to urgently address the agency's "reactive" safety culture. "The lack of trust makes many managers at FAA reluctant to speak up for fear of retribution," Bedford wrote. He cited "failures" like the FAA's Boeing 737 MAX certification, oversight of chronically delayed air traffic control implementation, and continued controller shortages. Transportation Secretary Sean Duffy wants Congress to approve tens of billions to reform air traffic control and boost staffing. "The root cause of FAA's inability to complete its mission to modernize air traffic systems and effectively manage safety is the lack of strategic vision and competent leadership," Bedford wrote. The FAA does not encourage risk-taking for innovation, Bedford added. "There appears to be no incentive for anyone at FAA to take any innovation risk for fear that it could fail," Bedford wrote. "You could say there was an 'if it ain't broke, don't fix it' attitude, but that has morphed into a quiet resignation that 'we can't fix it, but we can do our very best to make the system work safely today' mindset."
Yahoo
26 minutes ago
- Yahoo
Jim Cramer on Home Depot (HD): 'I Think We're in Good Shape'
We recently published a list of . In this article, we are going to take a look at where The Home Depot, Inc. (NYSE:HD) stands against other stocks that Jim Cramer discusses. A caller asked how Cramer thinks The Home Depot, Inc. (NYSE:HD) would perform in the long term. He replied: 'Oh man, I was making calls on Home Depot today because it's starting to roll, and then wouldn't you know it, it pulled back right at the end. I think we're in good shape. I think when rates just stay stable, we'll be fine. I think that the gardening season's coming along fine, but let me just say, people just look at housing starts and they say, let's sell Home Depot. Don't be constrained by that. I think they're going to have a great year. Let's think seven years, not seven days. Thank you, Larry Fink for that. I love that. It was in the FT yesterday.' Home Depot (NYSE:HD) is a retailer specializing in home improvement products, including building materials, home décor, and garden supplies. The company provides installation services for home projects and rents out tools and equipment. Earlier in May, Cramer said: 'Now, not that long ago, we dropped in on a monster Home Depot store management meeting in Vegas where we heard about some great ideas for spring gardening season, which by the way, kicks into overdrive this weekend. Unfortunately, these big weeks for lawn and garden have been overshadowed by stubbornly high interest rates and no rate cuts from the Fed, not to mention tariff worries. Now I've watched this stock since it came public, and there are plenty of times that Home Depot doesn't actually march to the tune of interest rates, but instead is levered to repair and renovation. An insurance broker discussing policy options with a homeowner. As so many people are stuck in their homes, I'm willing to trade up because that would force them to give up that low mortgage rate that they may have gotten during the COVID period. Now we own the despot for the Charitable Trust, and while I'm not expecting a blowout by any means, I have to tell you I like it long term, and it's down 2% for the year, well, off its highs… Home Depot stock is a great one to own because, like Walmart, these guys have the scale to cope with the tariffs that are going to be put on so many foreign-made goods that they sell at Home Depot. The little guys we know, they don't have that kind of flexibility.' Overall, HD ranks 10th on our list of stocks that Jim Cramer discusses. While we acknowledge the potential of HD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
USA Today
26 minutes ago
- USA Today
'Trump accounts' for babies? Why the White House is pushing cash for kids
'Trump accounts' for babies? Why the White House is pushing cash for kids The program for babies born during Trump's second term would involve a one-time $1,000 federal contribution into an index fund tied to the stock market - with some of the money available at age 18. Show Caption Hide Caption Who will benefit from President Trump's 'Big, Beautiful Bill'? The nations richest Americans will see benefits from the Trump administration's "Big, Beautiful Bill," while the poorest will be left behind. WASHINGTON — In his first term, President Donald Trump made waves when he put his name on stimulus checks the U.S. government sent to millions of Americans during the COVID-19 pandemic. Now, the Republican president is celebrating a provision tucked into the GOP tax bill that would create and affix his name onto investment accounts for babies, if the legislation that very narrowly passed the House makes it through the Senate and becomes law. The program for American children born during Trump's current term would involve a one-time contribution from the federal government of $1,000 per toddler into a mutual or index fund that is tied to the performance of the stock market. The legislation also allows for parents to make contributions of up to $5,000 in outside contributions annually during childhood - and the child could then access some of the money when they turn 18 for things like education, training or a first-time home purchase. The full balance would be available at age 30. From gym memberships to gun silencers, Trump's tax bill is full of surprises House Republicans changed the name of the program from "MAGA accounts" to "Trump accounts" before the bill's passage last month, offering the president a tangible benefit for working-class Americans that he can put his stamp on. The program also serves as a counter to Democratic arguments that the legislation that extends the GOP's 2017 tax cuts primarily helps the nation's wealthiest Americans. Trump is set to announce at a June 9 event that a handful of large corporations have further pledged to contribute to their employees' accounts. The term-limited Trump is set to leave office on Jan. 20, 2029, but he and the GOP could benefit politically from the creation of the program in the 2026 campaign. Midterm elections have historically been unkind to the sitting president's political party, and Republicans have been sprinting to get their tax cut bill through quick enough to improve their political fortunes. White House press secretary Karoline Leavitt said the bill would "change the lives of working, middle class families across America" through tax cuts, increasing the child tax credit, "AND by creating this incredible new ''Trump Account' program, which will put the lives of young Americans on the right financial path!' White House pushes 'Trump accounts' as Senate debates tax cut bill The House overcame a myriad of obstacles, coming from pockets of lawmakers in the GOP and a unified opposition from Democrat, to pass the lower chamber in late May. It has since run into trouble in the Senate, where conservative Republicans have raised fresh concerns that the bill would balloon the national debt. They are also fighting over provisions dealing with Medicaid and the state and local tax deduction that were critical to the bill's passage in the House. Only three Republicans can defect for the bill to pass. Sen. Rand Paul, R-Kentucky, has said he's a no, while senators such as Ron Johnson, R-Wisconsin, have pushed to get the pricetag down. Donald Trump Airport? Trump on the $500 bill? Republicans can't stop honoring ex-president Trump has been putting public and private pressure on lawmakers to vote for the bill. The White House last week touted support from police officers in a bid to bring attention to Trump's fulfillment of a campaign pledge in the legislation to eliminate taxes on overtime. This week, he's turning his attention to the investment fund for newborns in the legislation that would start as a pilot program. The benefit is backdated to begin on January 1, 2024 and end on January 1, 2029, just before the end of Trump's second term, though the White House hopes the program will be so popular that it is permanently extended. CEOs pledge to invest in 'Trump account' program The White House offered to sweeten the pot on June 9, when it said the CEOs of several large corporations would make billons of dollars in additional investments into accounts for the children of their employees. Dell Technologies, Salesforce, Uber and Goldman Sachs were among the companies the White House said would be participating. In a statement provided by the White House ahead of the event, Michael Dell, the CEO of Dell Technologies, said his company would "match dollar for dollar the government's seed investment into these accounts for all the children born to Dell team members." Nvidia CEO Jensen Huang called Trump's plan "visionary—a seed fund for America's next generation" and said his company would contribute an unspecified amount to the accounts of its employees children.
