It’s being blamed for a sudden upsurge in debt.  It’s even coping flak because parents paying high school fees are falling behind, not realising BNPL means they get four bills instead of one.

So now, regulators are moving in on the millennial payment system that allowed so many to shop online for so much during the pandemic.

And the result: your fees are about to increase as the government seeks to increase regulation of the sector.

At present, buy now-pay later are not allowed to pass fees or surcharges onto consumers. But as the government looks to regulate the industry that may change.

The Reserve Bank of Australia argued in October that retailers should be allowed to pass on fees to consumers who choose to buy now and pay later.

To use Afterpay, retailers pay fees of between three and seven per cent. The fees are slightly lower for the use of Zip, which are between two and six per cent of the purchase price.

Federal Treasurer, Mr Josh Frydenberg told the Australian Financial Review that the government was looking to modernise the regulation of the buy now-pay later system by the middle of 2022.

A survey by FCA of 284 financial counsellors found 84 per cent said a majority of clients had buy now, pay later debts, up a third on last yeasr.

A further 61 per cent of counsellors reported that clients using buy now, pay later are struggling to pay other living expenses.

“Many clients are prioritising BNPL repayments over other essential expenses, like food and rent, to keep their BNPL accounts open,” said the report entitled It’s Credit, It’s Causing Harm and We Need Better Safeguards.

A total of 95 per cent said it must be considered credit – and therefore subject to the same strict laws and regulations governing home loans and credit cards. The companies generally say they aren’t providing credit but a “budgeting tool”.

The CEO of Consumer Action Law Centre, Mr Gerard Brody spoke to the Australian Financial Review and said that the reforms would provide an opportunity to ensure that buy now-pay later is regulated effectively and consistently with other products to address the significant risk of debt and financial stress associated with these products.”

Afterpay does not perform a credit check or report any information to credit agencies, so your credit history will not be affected. No credit check means that consumers have the responsibility to ensure that they can afford to use the scheme. 

Afterpay requires 25% of the purchase price and Zip doesn’t require any upfront payment. 

When you first sign up as a user of Afterpay, your limit starts at around $500 and gradually increases as you build up a history of making payments on time. 


If you use Zip, your limit starts at $350 (originally $250) and then gradually increases to $5,000 as you build up a history of making consistent payments.

Finder credit card expert Ms Amy Bradney-George says; “BNPL is so enticing because it’s interest fee and easy to sign up for when you’re already shopping. It plays on the growing need for instant gratification and the fear of missing out.

“Unlike traditional lay-by where you’d only get the item after you made the final payment, Afterpay, Zip, Humm and Klarna let you get the item immediately and then pay for it over a certain period of time, interest fee.

Consumers could find themselves in financial trouble due to the tempting nature of BNPL schemes.

Finder’s Ms Bradney-George advises consumers: “Remember to only make the purchase if you’re confident you’ll be able to comfortably pay it back in time and don’t spend beyond your means. Check how much you’ll need to pay for each installment before you commit to it.

“While most BNPL providers cap their late fees, consumers could still end up paying more than a credit card.

“BNPL can be convenient but just a few late fees can stack up quickly.”

At present you will not pay to use Afterpay unless you miss your payments. Every missed payment will incur a missed payment fee of $10, plus $7 if an account remains unpaid for seven days up to a maximum of 25% of the purchase price or $68, whichever is less.

Zip Pay charges a monthly fee of $6 and late payment fees of $5.

“Before purchasing any item with BNPL, be sure to familiarise yourself with the provider’s payment terms.”

Consumer watchdog, ASIC (Australian Securities and Investments Commision) conducted research into the scheme last year that revealed 20% of consumers missed payments. The report says that there was an increase of 38% on the previous year and totals $43 million.

Just under half (47%) of consumers who missed payments were aged 18-29.

One in five buy now-pay later users said they had gone without essentials to meet their repayments and 15% said they had taken out an additional loan. Of those who took out an additional loan, 50% were aged 18-29.

No decision on the future of the buy now-pay later scheme will be made before the election, which is due before May next year.

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