What has not changed

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• Buy now pay later providers are not covered under the National Consumer Credit Protection Act
• Buy now pay later providers can start legal proceedings to seek a court judgment for a debt (if it is in default). Experience suggests that they are usually reluctant to take legal action
• Do consider whether the credit was affordable when granted. The responsible lending provisions of the National Consumer Credit Protection Act do not apply but other obligations such as unconscionability, maladministration in the decision to provide credit or Contract Review Act (NSW only) may apply.

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What do the changes mean?

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• The approach for financial hardship is going to be very similar to the approach taken before the pandemic
• It should be easier to stop default fees and other costs
• Waivers or reductions in debt should be available (although they will still be difficult to obtain) for people in significant long-term financial hardship
• You need to consider immediately cancelling the direct debit for any repayment arrangement your client can no longer afford. Talk to the buy now pay later provider about different methods for making payments
• Buy now pay later remains a low priority debt

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What do you do differently?

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• Do inform the buy now pay later provider if your client has been financially affected by the pandemic
• Do let the provider know if your client is receiving JobSeeker or JobKeeper payments
• Do check the website of the buy now pay later provider to see what assistance is available for people financially affected by COVID-19
• Make sure you consider the following issues in your negotiations:
  • Late fees and default/legal fees not to be charged. For example, AfterPay has told FCA that it freezes default costs when a customer asks for hardship assistance (although this promise is not on its website)
  • Repayments must be affordable
  • Do negotiate longer-term repayment arrangements if this is necessary. It is likely that making these arrangements may be difficult but you may need to insist if your client has a lot of debts
  • Negotiate a debt reduction in full and final settlement if the client has funds and the settlement would help financial stability

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Resources

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Australian Finance Industry Association: Supporting Customers in Financial Difficulty

Australian Financial Complaints Authority: Coronavirus (COVID-19) pandemic – support hub.

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