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Reuters
a day ago
- Business
- Reuters
Australia's Afterpay says some BNPL users told to close accounts, then sold credit cards
SYDNEY, June 10 (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 (XYZ.N), opens new tab, 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 ( opens new tab told Reuters that they did not tell applicants to close their BNPL accounts. A spokesperson for No.4 lender ANZ ( opens new tab 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". 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, ( opens new tab 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".
WIRED
6 days ago
- Business
- WIRED
‘Buy Now, Pay Later' Booms as Economic Pressures Mount
Jun 4, 2025 5:00 AM BNPL services have become an enduring part of the US economy. That might not be a good sign. Photo-Illustration:The economic winds whipped up by President Trump's 'Liberation Day' tariff proclamations in early April have been anything but a gentle breeze. Rising prices, fomenting trade wars, and uncertainty about when tariffs will go into effect has led to a volatile economic climate. People looking to buy electronics and other goods affected by the tariffs are trying to figure out whether they should wait it out to see if the administration's trade policies become more favorable, or quickly scoop up what they can while prices are still cheap-ish. For consumers weighing a purchasing decision, buy now, pay later services like Klarna, Affirm, and Afterpay are offering to make that choice easier. These companies make a relatively straightforward case: Spread out the cost of a purchase into smaller, more manageable payments over the course of a few weeks or months. Because BNPL services make deals with the sellers they're providing the payment plans for, the companies behind the BNPLs don't charge interest to the customer. So instead of spacing out a purchase with a credit card, say—which usually charges a high interest rate—BNPL would get you that thing you want for the listed price. BNPL companies don't require you to have good credit, and they only charge fees if you're late with your payments. Otherwise it's a nice free amenity—and one that might indicate bigger financial troubles across the economy. Nadine Chabrier, senior policy council at the nonprofit Center for Responsible Lending, says it is easy to see why BNPL services are appealing. 'The top reasons consumers use buy now, pay later is because they can't afford the full cost of the item at once,' she says. 'Another reason is because there's a higher approval rate. It's that convenience factor.' Economic uncertainty—over tariffs, rising inflation, and the possibility of a looming recession—is giving consumers pause about stretching their limited funds. It's rocky times like these when BNPL services become even more appealing. 'BNPL really skyrocketed in adoption during the pandemic,' says Matt Gross, a spokesperson for Affirm. 'It may not be as high-growth now as you saw in 2020, 2021, when everyone was stuck at home shopping online, but we're still growing at orders of magnitude faster than broader spending and consumption levels.' Stress Spending Economic watchdogs have concerns about BNPL. The services often appeal to people with lower incomes, who financial experts have warned may be at risk of financially overextending themselves. Still, BNPL services are now woven into nearly every digital payment platform, and people have come to rely on them. PayPal offers it now, letting you spread out payments of almost anything. Klarna has partnered with DoorDash, so you can pay for your family's dinner in weekly installments. And people aren't just using them for electronics and pizza delivery, but also for basic essentials: A recent study found that 25 percent of BNPL users in the US were relying on the services to cover the costs of food and household sundries. 'Before tariffs even came into the picture, people were already using BNPL for gas and groceries,' Chabrier says. 'We're already talking about folks who may not have a lot of money or credit to spare. Additional economic stress could be hard.' 'Absolutely, this is a leading indicator of financial distress,' says Martin Kleinbard, founder of the consultancy firm Granular Fintech who formerly worked at the Consumer Financial Protection Bureau and coauthored a CFPB report about BNPL. 'Consumers are smart. They understand where they're getting the lowest-cost-of-credit option here and are going to avail themselves of that for the goods they have to get.' Kleinbard says that in terms of acquiring debt, BNPL services can be more forgiving than high-interest loans like credit cards and payday loans. 'BNPL has grown rapidly over the last five years,' Kleinbard says. 'But it's still a tiny, tiny fraction of the overall spending and borrowing pie. You really have to think about it in the context of the alternatives. If the alternative is you were going to borrow anyway and it's an important purchase, then this is a pretty damn good option. This isn't a product with a lot of gotchas.' Economically, lots of people have compared the looming uncertainty of the tariff situation with that of the pandemic. But Gross says Affirm has weathered the storm before and doesn't expect this economic shakeup to be all that different. 'I wouldn't go so far as to say this is an opportunity for us, other than to say that I think the last several years and years into the future is an opportunity,' Gross says. 'People are shifting their payment preferences to favor these types of products. And so in that sense, we are trying to be their favorite way to pay—not just when things are uncertain, but all the time.' Storm Watch Shawn DuBravac, chief economist at the analyst firm IPC, says he agrees this is indeed a moment for buy now, pay later services, for better or worse. It's a service that's growing during a time of uncertainty that will make the service more appealing. The financial leg up it provides can indeed be helpful, but DuBravac cautions that the benefits are likely not evenly distributed. 'This could be a very good thing for some people; this could be a great service that could help them through a tough week,' DuBravac says. 'But you can't get around the fact that people who are using it then might have all of a sudden a downturn in their job. They lose their job, their household goes from two incomes to one income, all of a sudden they're strained.' As with any loan, both the borrower and the lender incur risk. DuBravac says this moment, if the economy truly does spiral, may be the first real test of whether the BNPL industry is stable enough to keep themselves and their borrowers afloat. How well that system maintains in the face of financial downturn really depends on whether people are using it as a convenience or out of necessity. 'Are they using it as a bridge or are they using it as a crutch?' DuBravac says. 'If they're using it as a crutch, then I think there's a lot more risk there.'
Forbes
27-05-2025
- Business
- Forbes
Best Southwest Credit Cards Of 2025
Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed. Earn 50,000 bonus points after spending $1,000 on purchases in the first 3 months from account opening. Earn 50,000 bonus points after spending $1,000 on purchases in the first 3 months from account opening. Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Earn 50,000 bonus points after spending $1,000 on purchases in the first 3 months from account opening. Earn 50,000 bonus points after spending $1,000 on purchases in the first 3 months from account opening. Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Earn 50,000 points after spending $1,000 on purchases in the first 3 months from account opening Earn 50,000 points after spending $1,000 on purchases in the first 3 months from account opening Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards. Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards.
CBS News
21-05-2025
- Business
- CBS News
Can buy now, pay later debt be sold to debt collectors?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Buy now, pay later plans may seem convenient, but there's a chance that they could cost you a lot more than you bargained for. BALLS/Getty Images In recent years, buy now, pay later (BNPL) services like Afterpay, Klarna, Affirm and others have exploded in popularity, especially among younger consumers. The appeal of this type of payment option is obvious: You can split up purchases into smaller, more manageable payments, often without interest, and check out instantly without the need for a traditional credit card. And, that low- or no-interest feature can be quite enticing, especially right now, as the high rates tied to other short-term borrowing options can make those financing options extremely expensive. While buy now, pay later plans might feel less risky than the alternatives, though, they still come with consequences if you fall behind. And as more people turn to these installment payment services to manage everyday expenses, from clothes and cosmetics to groceries and gas, some borrowers are also missing payments. That, in turn, can cause big issues over time, as these types of plans are still financial obligations that need to be repaid, and they can have steep late payment fees and other charges tied to them. So, what happens when your BNPL payments spiral out of control? Can that debt be sold to a collection agency the same way that other debts can? And if so, what can you do about it? Below, we'll break down everything to know. Take steps to start tackling your debt problems today. Can buy now, pay later debt be sold to debt collectors? Most buy now, pay later debt can be sold to debt collectors if it goes unpaid for long enough. While each BNPL company has its own policies, many will attempt to collect the debt in-house for a period after you miss a payment. If those attempts fail, they may either outsource the collection process to a third-party agency or sell the debt outright to a collector. This might come as a surprise to some users, especially because many buy now, pay later services market themselves as interest-free or low-risk. But just like credit card companies or traditional lenders, BNPL providers are in the business of getting paid. When you agree to a buy now, pay later plan, you're entering a legally binding contract, and defaulting on that agreement has real consequences. Here's how it usually plays out: You miss a payment (or several). The BNPL provider starts sending reminders or warning notices. After a certain period, often 60 to 90 days, the debt may be considered in default The account may then be sent to collections In some cases, the debt collector may report the delinquent debt to the credit bureaus, which can hurt your credit score It's also worth noting that some buy now, pay later providers, particularly those that conduct soft or hard credit checks to approve you, already report your payment history to credit bureaus. So missed payments could show up on your credit file even before your debt is sold to collections. Find out more about your debt relief options now. What to do if your BNPL debt has gone to collections If your buy now, pay later debt has been sent to collections, don't ignore the issue. The longer a collection account lingers, the more damage it can do to your credit and financial stability. Here are some steps you can take to deal with it: Verify the debt. Always request a written validation notice from the collection agency. This should outline how much you owe, who the original creditor is and your rights as a consumer. Never pay a debt until you've confirmed it's legitimate. Understand your rights. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors must follow strict rules. They can't harass you, lie about what you owe or threaten you with legal action they don't intend to take. You also have the right to dispute the debt if you believe there's an error. Negotiate a settlement or payment plan. Many debt collectors are open to settling the debt for less than the full balance, especially for BNPL debts, which are often lower in dollar amount than traditional loans. You can also ask to break the balance into smaller monthly payments if a lump sum isn't feasible. Explore debt relief options. If your buy now, pay later debt is just one piece of a larger debt problem, it may be time to consider broader debt relief strategies, like: The bottom line Buy now, pay later plans might seem like a low-stakes way to shop, but they come with real financial obligations. If you fall behind, your debt can be sent to collections, just like any other form of credit. And once that happens, it can damage your credit and trigger aggressive collection efforts. If you're already in that situation, don't wait to take action. Verify the debt, understand your rights and explore the right resolution strategy for your financial situation. Whether it's negotiating a payoff, seeking help from a credit counselor or considering more formal debt relief, the sooner you act, the better chance you have of getting back on track.
Yahoo
19-05-2025
- Business
- Yahoo
UK to regulate ‘buy now, pay later' lenders in legal overhaul
Lenders that specialise in 'buy now, pay later' services will have to abide by the same rules as mainstream banks under long-awaited Sign in to access your portfolio
