Afterpay Raking $28M a Year from Late Fees

dcep on 30/08/2018 - 14:42
Last edited 30/08/2018 - 14:45

"Afterpay is raking in millions at the expense of debt-ridden and vulnerable Australians.

As many as one-quarter of Afterpay users are suffering financial stress, with one in three admitting to missing at least one payment.

The National Debt Helpline is receiving an increase in reports from vulnerable consumers using the app.

Afterpay’s annual report revealed that the company’s late-fee earnings rose by a massive 365 per cent, to $28.4 million, in one year alone.

About one-quarter of its income now comes directly from late fees, with the remainder from retail sales commissions."

https://thenewdaily.com.au/money/consumer/2018/08/24/afterpa…

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Comments

      • [Deactivated] on 30/08/2018 - 16:42
        +2

        Being done by the police is not an equivalent just like mortgage defaults may not be. Rules and interest rates vary. These scenarios are not volunteery in some instances.

        Buying something you don't need and clearly can't pay for is an entirely different thing.

    • tomsco on 30/08/2018 - 16:57
      +4

      Will you be my soul mate?

      I'm having a robust discussion with someone about their electricity/gas bill.

      They're going off saying the energy company is trying to rip them off and they're going to move.

      I asked what the issue was but they can't be bother investigating.

      I said if the usage is accurate, what is moving companies going to do. You use the electricity/gas, you have to pay for it.

      • Sean R on 01/09/2018 - 00:37
        +1

        This is a truism, but it seems worth mentioning…

        By switching gas, most people will pay less for exactly the same electricity/gas.

        • tomsco on 01/09/2018 - 07:38
          -2

          Oh, I agree 100%.

          I’m just moving now because my retailer jacked up my prices.

          But if you’ve got an $1000 bill, that wouldn’t all of a sudden be $300 under a different retailer. And that’s what these people don’t seem to understand.

    • Mokr on 31/08/2018 - 11:03
      +11

      There are no vulnerable consumers only stupid consumers.

      There are no irresponsible lenders, only irresponsible borrowers.

      I don't care, but I do care about the general well being of society. Which is better, a country that doesn't have more peopel in debt or one that does. Economically these companies don't add anything.

      If anything you will be paying more in taxes to support welfare for individuals caught int these traps

      • burningrage on 01/09/2018 - 13:57

        Then the alternative is no one is getting credit or much harder getting credit which is what is happening right now.

        I think CBA now wants you to list down many expense categories incl your spend on subs like netflix.

        And that scrutiny costs all of us, both responsible and so called irresponsible ones.

        Overall spend down and economy would accordingly down as well.

    • cloudy on 31/08/2018 - 15:21
      +18

      Has the royal commission exposed nothing?

      It’s like blaming pokies addicts for their addiction. Lots of work goes into irresponsible lenders using high pressure tactics targeting both vulnerable and non-vulnerable people on a off or tough day , all in the name of making a commission. It’s not exactly responsible tactic.

      There are plenty of stupid people yes, buts the vulnerable that needs protecting.

      I used to have your exact same mentality, it’s not until I meet my mentally less able brother in law I realised why protection is needed. Legally nothing wrong with him in the eyes of the law, but having mild autism, he can’t not comprehend the meaning of finances, he has trust in authority that doesn’t really exist, but may appear as such( people in uniform, directions on websites) he gets sucked into the basic of sales tactics, not even the need for high pressured ones.

      High pressured sales tactics of selling finances is prettt much the genisus of the GFC selling NINJA loans to the “stupid”.

      It’s just not good for society

      • callum9999 on 31/08/2018 - 23:16
        +3

        I'm struggling to see how Afterpay is "high pressure selling"?

        • cloudy on 01/09/2018 - 09:22

          I’m explaining why regulations are required. When left unchecked capitalism has poor consequences.

          Afterpay scouts credit legislations, credit cards charge interest by month. AP charged late fees by month. Either way it’s a charge of money on those who miss payments. AP was clever enough to structure their product to avoid laws to protect people.

          Hence why it’s a bad outcome on society.

          Remember, our world is no better off having more and more expensive middle men, when more expensive middle men go between us and those who provide us with goods, it has to be a worse outcome overall.

          Either sellers have to charge higher prices or consumers pay more. This is what is occurring.

      • josho9 on 31/08/2018 - 23:31

        At no point has the article attempted to explain why the particular consumers are "vulnerable".

  • pantsparty on 30/08/2018 - 15:18
    +49

    I say good on Afterpay. They have created a great business for themselves.

    • BartholemewH on 03/09/2018 - 06:27

      If 650 out of 1000 purchased items they wouldn't usually (from figure above), that is a resounding success for afterpay and the retailer imo.

  • Sergeant Salami on 30/08/2018 - 15:19

    What's the point of AfterPay? Can't you just use a credit card instead or is AP for people who can't get a credit card?

    • Cheaplikethebird on 30/08/2018 - 15:23
      +13

      Because you can still get an AP loan with maxed credit cards.

    • HighAndDry on 30/08/2018 - 15:28
      +8

      It's a purchase by purchase thing, no ongoing commitments or fees, no credit checks, better for people with no income or on a fixed income (pensioners etc) who won't qualify for a credit card, etc.

    • Illian on 30/08/2018 - 15:39
      +2

      Pretty much, very useful for those whose VISA's won't let them get a credit card until they're Permanent Residents, which can take up to 5 years.

      • dp1 on 30/08/2018 - 15:58

        Why do you need residency for a credit card? I got one 10 years ago with only an employment contract (not even started working in Australia so no payslips)

        • Illian on 30/08/2018 - 16:10
          +1

          Not sure, it's what NAB told us, they wouldn't even let my husband open a bank account without it being a joint account with me. Even the cards you can get these days while not a PR need more verification and documents, with lower limits and higher fees, not worth it at all.

        • dp1 on 30/08/2018 - 16:12

          Pesky responsible lending criteria! I was approved for the equivalent of 8% of my projected annual income no questions asked.

    • Hybroid on 30/08/2018 - 16:45
      +6

      Convenient way to splitting purchases costs over 4 fortnightly payments with no interest as long as you setup auto-payments. Why wouldn't you?

      • chriskq on 31/08/2018 - 13:36
        +1

        or you know… just buy the item when you have the money

        • Hybroid on 31/08/2018 - 13:55

          In theory that's always good advice but there are times when items are needed earlier or if they're on a good sale etc.

        • callum9999 on 31/08/2018 - 23:18
          +3

          That's not a mutually exclusive event… I buy everything on credit - I have the money for it but why hand it over earlier than I need to?

    • Eeples on 30/08/2018 - 17:09
      +1

      Not everyone has a credit card.

      Many of those people who do not have credit cards have had problems managing their money.

      Fairly sure the point of the opening post is to highlight that afterpay makes much of its money at the expense of financially disadvantaged people.

      I think it is probably true and hence morally questionable.

      • HighAndDry on 30/08/2018 - 17:14
        +21

        These are financially irresponsible people. They're financially disadvantaged because they're financially irresponsible. You're basically feeling sorry for someone ending up in hospital because they deliberately ran at a brick wall head first.

        • elgrande on 30/08/2018 - 21:09
          +2

          Not everything is this black and white.

          People can be put in tough situations without their choosing -i.e. unexpected illness.

        • HighAndDry on 30/08/2018 - 21:26
          +10

          @elgrande: Pray tell what life-saving device you can buy using Afterpay.

        • afah0447 on 31/08/2018 - 09:11
          +3

          Society's current model of rampant consumerism and 24/7 marketing makes it very difficult for the average person to not blindly spend money…whether they actually have the money or not, or even if they really need the item.

          Its this model that makes a very small group of people extremely rich, and the majority poor.

          I don't judge these people, I just feel sorry for them.

        • Cheaplikethebird on 31/08/2018 - 09:13
          +1

          @HighAndDry: It's not Afterpay, but…

          https://zipmoney.com.au/healthcare/find-a-clinic/

        • HighAndDry on 31/08/2018 - 10:21

          @Cheaplikethebird: Ha! Why does that exist here in Australia? Any truly life threatening issues would be sorted by ER and Medicare I would've assumed.

          Though flip side is still - if someone did need it, would people rather the option didn't exist? Zippay are doing more for the needy person than anyone here because I'm sure no one here is going to lend (or give) money to a stranger who can't get a credit card.

        • Cheaplikethebird on 31/08/2018 - 11:16

          @HighAndDry: Yeah but there's plenty of issues that aren't life threatening which if not treated can progress to something that is life threatening and also expensive to treat. I'm not sure if you can take those to the ER, I have gone to the ER for the bad cough as a kid and waited something like 8 hours to see someone which is not always something you can really do if you are a working single parent.

        • HighAndDry on 31/08/2018 - 11:18

          @Cheaplikethebird: Oh yeah fair enough. Also it's just a list of clinics that accept Zippay, not a chain of clinics run or owned by Zippay (no idea why I even thought that tbh).

        • onevstheworld on 31/08/2018 - 16:53

          @HighAndDry:
          If you look at the clinics on the site, none treat life threatening conditions. Most are cosmetic or dental clinics.

          Edit: that should read "human life threatening"… there are a few vets on that list.

        • Interrupting Cow on 31/08/2018 - 22:50

          @HighAndDry: You can buy brakes at https://www.adbbrakes.com/

          /s

        • Sabrinalee on 02/09/2018 - 16:38
          +2

          It's called empathy. We all should have more of it.

        • Eeples on 04/09/2018 - 20:51

          No, I'm not feeling sorry for them.

          I am suggesting that they should not be further taken advantage of by Afterpay with large late-fees.

          A small late-fee is probably morally okay.

          Let Afterpay get their profit from retailers who want to use their service and other ways.

          Their increase in share price demonstrates that a reduction in late-fee will not run them out of business.

        • HighAndDry on 04/09/2018 - 21:49

          @Eeples: who are you to tell them who they can get profits from? The people using the service weren't complaining when they were using someone else's money to buy stuff. How moral is that? Well you'd say - Afterpay is offering so why not? And that's fair enough.

          And the people using it are offering to pay the late fees. Why's it suddenly a moral issue that they're being held to a promise they willingly made?

      • sahh on 31/08/2018 - 07:41
        +1

        AP came to do presentation at my work place recently, majority of their customers are millenials (no surprise), many of which do not have credit cards as they think they’re risky. A lot of AP transactions are linked to debit cards.

        • susmind on 31/08/2018 - 11:34

          How much was the bosses cut ?

        • DemocracyManifest on 01/09/2018 - 23:29

          Many wouldnt be able to get credit cards because they are casual employees and probably renting

        • BartholemewH on 03/09/2018 - 06:31

          @susmind:
          I would have assumed this was a sales call to get the business on as a provider.

    • onepiecetcgnami on 31/08/2018 - 11:06
      +1

      Or in the hands of a capable one. You can use afterpay to pay in instalments (since no interest) and then use the remaining amount to make you more money/gain interest
      .

    • ely on 03/09/2018 - 15:00
      +1

      AfterPay / ZipPay are handy even if you have cash or a credit card. Pay on ZipPay for example, get 30 days interest free, then pay on your credit card, get (up to) another 55 days interest free, then actually pay it off. Leave the cash somewhere earning money in the interim. The more of your expenses you can structure like this the better your return.

      But yeah, I suspect for most people it's like a credit card lite version, and they use it to pay for things they don't have the cash for, and so end up paying late fees.

  • chumlee on 30/08/2018 - 15:33

    How much do you think they should charge for late payments?

    • Hybroid on 30/08/2018 - 16:47
      +9

      Absolutely whatever they want. They're entitled to charge whatever they want as long as are clear and upfront about it. We're entitled to either accept that or choose not to.

      • PAOK11 on 30/08/2018 - 21:13
        +1

        I don't think that's entirely true. It has to be a justifiable loss. What I mean by that is the lender must prove they sustained loss to the value of the breach. In saying that my late fee on my credit card is $30 ?!?!?!

        • Hybroid on 30/08/2018 - 22:02
          +3

          What I mean by that is the lender must prove they sustained loss to the value of the breach.

          Why? It's a free market business and you're not obliged by any way shape or form to accept their terms. They can make it $100 if they wanted.

        • PAOK11 on 30/08/2018 - 22:09
          +4

          @Hybroid:

          Paciocco confirms that banks have a right to charge customers late fees if the failure to make payments on time has sufficient impact on the bank. However, this case was lost primarily because Mr Paciocco did not prove that the actual impact to ANZ (eg operational costs, loss provisioning and increases in regulatory capital costs) was out of all proportion to the fees. Perhaps if evidence of those matters were lead at trial the outcome might have been different.

          In the meantime, and if was ever in doubt, the full suite of bank fees (late payment, dishonour, overdrawn etc.) are not going away in a hurry.

          look this case Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 (Paciocco).

        • HighAndDry on 31/08/2018 - 11:26

          @PAOK11:

          this case was lost primarily because Mr Paciocco did not prove that the actual impact to ANZ (…) was out of all proportion to the fees.

          So it's not that they can only recover the costs, but that they can recover amounts not out of all proportion to the costs. That's a far more flexible requirement, and something like the ~$50 that Afterpay charges can easily be justified by additional admin and risk costs.

        • PAOK11 on 31/08/2018 - 11:38

          @HighAndDry: The difficult part of the case was the onus was on the plantiff to prove that the charge was extravagant. I don't understand how the plantiff is supposed to have access to (operational costs, loss provisioning and increases in regulatory capital costs) to prove the fees are out of proportion. Interesting none the less and in my view the higher the fee the more likely you are to get a ruling in your favour.

        • HighAndDry on 31/08/2018 - 11:44
          +1

          @PAOK11:

          The difficult part of the case was the onus was on the plantiff to prove that the charge was extravagant.

          Maybe it was difficult to prove because it wasn't extravagant.

          Plus, from the article, Afterpay is charging:

          A $10 late fee is incurred if a payment is missed, with an additional $7 charged seven days later if the payment remains unpaid.

          Which I don't think anyone could argue is "extravagant".

        • PAOK11 on 31/08/2018 - 11:45

          @HighAndDry: Yes, I agree but i'm replying to Hybroid initial comment and not familiar with after pays T&C's

        • cloudy on 01/09/2018 - 23:05

          @HighAndDry:

          What do they do in the first 7 days to charge that $10? send you a auto email? if thats all, i would call that email "Extravagant". I dunno, just asking the Q

        • Mrgreenz on 02/09/2018 - 08:54
          +1

          @Hybroid:
          So you would be happy with them charging $100 dollar late fee on a say a $50 dollar purchase over four 12.50 payments?

          Say the first payment is missed, moraly you think its fine to have a $100 dollar late fee imposed? As long as its clearly set out

          Even though prior to implementation it would be known that some people, for lack of a better word are stupid enough to agree to the terms in all likelyhood whilst missing a payment in a months time?

          For whatever reason many people will use such services regardless of how bad the terms are, if selling kidneys was legalised tomorrow im sure there would be a few people rock up for a $1000 dollar payment

        • HighAndDry on 04/09/2018 - 21:46

          @Mrgreenz: again, these are adults. How moral is it to agree to something, benefit from that promise, and then renege on it when it's no longer in your favour?

        • Mrgreenz on 04/09/2018 - 23:20

          @HighAndDry:
          Just because you have to be an adult to sign up doesn’t mean much.

          The people who renege will be the ones that come out on top, the losers will be the ones who can`t manage their finances for whatever reason and end up paying vastly more for a product than they should.

  • Ocker on 30/08/2018 - 15:33

    Just one more factor in the house of cards called debt. Sadly by the time some people come to realise the house is about to collapse it is too late

  • [Deactivated] on 30/08/2018 - 15:44

    What does their cashflow look like? Are they actually converting this value?

  • miicah on 30/08/2018 - 15:49
    +12

    Bought probably $2k worth of stuff (car servicing parts, motorcycle safety gear, clothes) with AfterPay over the last two years. Haven't paid a single cent in late fees.

    • Tejas57 on 31/08/2018 - 15:40
      +3

      i'm coming close to 1k - flights and other goodies and i'm the same. as a matter of fact the majority of my afterpay purchises are paid off early

      • cloudy on 01/09/2018 - 23:02
        +1

        Why not use credit card? out of interest.

        • Gdsamp on 02/09/2018 - 17:25
          +3

          great pun

    • cloudy on 01/09/2018 - 23:02

      Why not use credit card? out of interest.

      • apptrack on 03/09/2018 - 12:55

        Some people don't want to affect their credit scores.

        • ely on 03/09/2018 - 15:02

          They "reserve the right" to run a credit check; I don't know how often they do, but it does not necessarily protect your rating in that way.

          And if they don't run a credit check then it makes accusations of predatory lending look more valid, unless they are able to justify whatever other means they have of assessing the borrower's ability to repay the loan.

        • apptrack on 03/09/2018 - 15:33
          +1

          @ely: They rarely do it:

          https://www.finder.com.au/afterpay-credit-score

          In saying their maximum amount is $1000 and if you have just signed up they usually don't allow over $150.

        • ely on 03/09/2018 - 16:54

          @apptrack: thanks, good to know - seems irresponsible.

        • apptrack on 03/09/2018 - 16:59
          +1

          @ely: Only as much as the person purchasing the item

        • ely on 03/09/2018 - 20:49

          @apptrack: If I loaned money to someone on the street with no assurance that they were capable of paying it back I'd say that both of us were irresponsible.

        • apptrack on 04/09/2018 - 09:06

          @ely: Agreed but there is limitations, first purchase is usually only under $100 approved.

          There is also no interest just a late fee.

          I find nimble and other loan sharks much worse.

        • ely on 04/09/2018 - 09:28

          @apptrack: Agreed also; it's ultimately up to consumers not to borrow money that they cannot repay. People that use credit badly subsidise those of us that use it wisely and I'm ok with that ;)

        • HighAndDry on 04/09/2018 - 21:51

          @ely: sure, but wanting to be repaid as agreed would be reasonable. No one would say - why are you trying to get your money back?!

        • ely on 05/09/2018 - 08:03

          @HighAndDry: Wanting to be repaid as agreed would certainly be reasonable. "As agreed" would cover late repayment with fees, which is probably AfterPay's preferred repayment approach :D

  • EightImmortals on 30/08/2018 - 15:51
    +1

    Geoff Wilson called these out for a strong buy a year or two back and the SP has done pretty well since (I should have bought them dammit….)

    • follow on 30/08/2018 - 15:59

      $2.95 on June 30 '17. Damn

  • hawkeye on 30/08/2018 - 16:01
    +4

    Wouldn't Afterpay attract to the kind of person who has had all their credit cards revoked from bad credit/bankruptcy so this would be the closest next thing?

    • HighAndDry on 30/08/2018 - 16:05
      +1

      Yes. Honestly the part about how a quarter of Afterpay users are under financial stress - they were likely using Afterpay because of that reason in the first place.

      There are going to be a lot who use it because they can't get a credit card for other reasons (pensioners, etc).

    • EightImmortals on 30/08/2018 - 16:11
      +1

      Not really, I use it if I want to buy something and spread the payments out depending on finances on the day.

  • zond on 30/08/2018 - 16:08
    +1

    Afterpay's stock price gained 600% since last year!!

  • Ughhh on 30/08/2018 - 16:21
    +1

    Imo, the Majority of people who use afterpay regularly are the people who need to avoid these Kind of services the most. But these people are who afterpay targets the most.

    You Want need to buy $300 of makeup from sephora right now but don't have the cash, no worries, use afterpay!

    Those people can only blame themselves for keeping themselves trapped in poverty.

    • HighAndDry on 30/08/2018 - 17:15
      +1

      They're just asset Sephora rich and cash poor!

  • Gotchas on 30/08/2018 - 17:41
    +4

    Most of these battlers will roll their eyes and ignore you when you try and educate them

    • payton on 30/08/2018 - 18:35
      +2

      and they go to Hardly Normal and pay full price no haggling for their stuff :(

    • Homr on 31/08/2018 - 15:17
      +5

      I wish I knew this earlier. I tried to educate a friend on using Ozbargain to purchase goods at a more discounted price to save money, she yelled at me saying "ITS MY MONEY, I SPEND IT WHERE EVER I WANT" She's no longer a friend.

      From now on I'm not educating anyone on how to manage and grow their money better.

      • payton on 31/08/2018 - 17:08

        there there, you only meant well

        • BartholemewH on 03/09/2018 - 09:33

          DON'T YOU TELL HIM WHAT HE MEANT!

  • xaykogeki on 30/08/2018 - 18:32

    The weirdest thing for me is that I've seen people use zippay / afterpay for $20 items…

    • payton on 30/08/2018 - 19:11
      +7

      $20 on afterpay is $20 pokies money this afo

    • pformag on 31/08/2018 - 12:57
      +1

      I've used afterpay for a $2.00 item.

      https://imgur.com/a/0LYryur

      • HighAndDry on 31/08/2018 - 14:43

        That's hilarious, did you need time to dig under the couch cushions haha!

    • BartholemewH on 03/09/2018 - 09:58

      *dis arvo

  • marquise on 30/08/2018 - 22:55
    +1

    Are there any cosmetic surgery clinics that offer Afterpay? =P

  • alwaysis on 31/08/2018 - 07:36
    +1

    Somehow my 16 yo and now 17 yo got an afterpay account and now she has a debt collector after her

    • apptrack on 31/08/2018 - 11:00

      Did she use your driver's license to sign up?

      • alwaysis on 01/09/2018 - 11:32

        Not that I am aware of

    • HighAndDry on 31/08/2018 - 11:45
      -6

      Everyone's thinking it, so I'll just go ahead and say it: this is pretty much on you as a parent to prevent.

      • alwaysis on 01/09/2018 - 11:33

        I would you suggest I prevent this??

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