Changes Coming for Afterpay Users Under New Credit Contracts and Consumer Finance Act
Afterpay to Implement Credit Checks and Reporting for Users
In a significant change set to take effect in the coming weeks, the buy now, pay later sector, including popular provider Afterpay, will start falling under the Credit Contracts and Consumer Finance Act. This decision was made by the former Labour Government following public consultation.
Afterpay, a company that allows users to buy goods or services and pay for them later in four interest-free instalments, believes that this change will have minimal impact on both its business and the majority of its users. Michael Saadat, Afterpay’s head of international policy, stated that the rule change will provide an additional safeguard to prevent users from taking on debt they cannot afford to repay.
The introduction of credit checks and reporting for buy now, pay later services has been welcomed by industry experts like Loan Market mortgage broker Bruce Patten. Patten hopes that this move will prompt users to treat this form of debt as seriously as they would other types of loans, especially when it comes to mortgage applications.
From July 23, existing Afterpay users will need to undergo credit checks before their borrowing limits can be increased. New users will also be required to undergo a credit check before signing up, helping to determine their initial borrowing limit. Afterpay will start sharing users’ information with credit bureaux from August 15, reporting at least monthly.
While some believe that these changes could have a significant impact on the sector, Afterpay remains confident in its ability to assess users’ repayment history and make informed decisions about credit limits. The company has already begun phasing in credit checks and scoring ahead of the mandatory implementation on September 2.
With more than 24 million active customers worldwide, Afterpay’s move towards implementing credit checks and reporting reflects a growing trend towards responsible lending practices in the buy now, pay later industry.
