Whether they’re eternally sitting in an online shopping cart, saved on a wishlist somewhere, or simply niggling away in the back of our minds, we probably all have a few products that we want to – but can’t – buy at the moment.
Many larger retailers have also long offered larger items on ‘the drip feed’ or ‘layaway’, with everything from TVs to couches paid for by instalments. Elsewhere, Block Inc – the Jack Dorsey-led fintech that’s formerly known as Square – last year agreed to pay $29 billion for Australian BNPL provider Afterpay.
It may not be immediately apparent to users, but what BNPL services offer is a form of credit – in other words, it’s a loan. Depending on the provider, a late or missed payment could see a sizable interest rate retrospectively applied to the entire amount borrowed. Users could also be locked out of using other services from the company in the future."They could be engaged on the company’s behalf to collect the debt, or your debt could be sold to them," says Ms O’Hara.
While the market is relatively young here, in countries where the BNPL market is much more developed, missed payments are a major problem. As part of that oversight, so-called ‘indirect credit’ institutions cannot charge an APR of more than 23% and must also notify the Central Bank of any plans to apply new fees or change their interest rates."It has been included in the new consumer protection act, which just came into force, which is a great move for us," says Dr McCarthy.
At present, authorised credit providers here must declare any loans worth €500 or more to the Central Bank’s credit register. In one case handled by MABS recently, a customer had even managed to take out multiple, separate loans with the same BNPL provider, leaving them with a debt way beyond what they could manage.
However financial experts worry that the proliferation of BNPL providers may be detrimental to users’ financial health – even those who always meet the repayment terms.
How we partied thanks to MBNA 😉… Gold for everyone….