Buy-Now-Pay-Later, Fast Cash Sector warned by Australian regulator
Buy now, pay later and quick cash providers are in the crosshairs of the corporate regulator as households come under pressure from rising interest rates and price inflation.
The Australian Securities and Investments Commission is also on a war footing over high-risk cryptocurrency products being lashed out at retail investors.
“This will not be tolerated and action will be taken,” President Joe Longo warned Thursday.
“We are seeing issuers promoting high-risk products as appropriate investments that will form a significant part of an individual consumer’s investment portfolio.”
When it comes to loans, Longo noted that the current tight market is putting pressure on consumers, with many turning to “marginal” outfits.
“Some people are turning to fringe sources of credit that can cause damage,” he told ASIC’s annual forum in Sydney.
“Some consumers are facing difficulties and backlogs.”
ASIC carefully scrutinizes potentially dangerous and predatory credit products and marginal lending practices.
“Our targeted credit monitoring work…focuses on credit cards, buy now, pay later products and small credit agreements,” he added.
Consumer protection was a top priority, and the regulator said it would not hesitate to seek significant penalties and take legal action against lenders who try to take advantage of financial vulnerabilities.
Demand for buy-it-now, pay-later services like Afterpay and Zip may have slowed in the September quarter, but sales were still up nearly 10% year-on-year, according to an Equifax study published late last month.
Most of the sales growth was driven by a post-COVID-19 consumer surge as more people shopped in stores rather than online.
“Consumers had more opportunities to shop at ‘physical’ stores this year compared to Q3 2021, and can choose different payment options when shopping in person compared to online,” said Equifax CEO Kevin James.
Figures from the Australian Bureau of Statistics last week showed a record 19.2% increase in retail sales on the year to August.
While some of the surges were driven by consumer activity, economists also noted that the rising cost of goods was also part of the sales story.