Afterpay and other buy-now-pay-later services (BNPL) are facing growing calls to follow the banks and offer repayment relief to customers financially hurt by the coronavirus.

Prime Minister Scott Morrison urged these service providers to step up and help customers as the pandemic continues to shutter businesses and force workers out of jobs.

BNPL services are used by roughly two million Australians and despite their similarity to credit cards and other debt products, they are not legally considered to be a line of credit.

Consumer Action Law Centre chief executive Gerard Brody told The New Daily this distinction means BNPL customers don’t have the same rights and protections as other credit users, including hardship provisions.

Mr Brody noted that other financial institutions, most notably banks, have been quick to offer help to vulnerable customers as the pandemic grips the economy.

So far though, there has been little if any response from the BNPL industry, and Mr Brody said the Prime Minister’s calls for more support should be heeded.

“But they’re businesses that take advantage of legal loopholes. I’m not surprised they haven’t been more proactive in helping their customers,” he said.

The push for better customer support comes after consumer advocacy groups challenged Australia’s big four banks over their credit card rates, which remain well above the Reserve Bank’s 0.25 per cent cash rate.

Quarter of customers cancelling their accounts

BNPL has been one of the fastest-growing ‘digital payment’ platforms in Australia with 9 per cent of Australians now using Afterpay at least once a year, according to Roy Morgan.

But new research conducted by consumer comparison site Mozo found customers have increasingly turned away from BNPL products since the pandemic began.

A survey conducted by the group in April found one in four customers (25 per cent) have deleted their BNPL accounts as they try to take control of their finances.

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Mozo’s research also found 35 per cent of customers are under financial pressure because of their BNPL debts and don’t know how they’ll pay their remaining bills.

“It can be very easy to make purchases through BNPL services and think everything is fine,” Mozo communications manager Gemma Rasmussen told The New Daily.

“The coronavirus has hit and it has left people scrambling.”

Those numbers show the need for BNPL providers to offer support to customers, Ms Rasmussen said.

“They should be coming to the party and offering more leniency, but technically they don’t have to so we’re not seeing any action,” she said.

“It will be a wait-and-see game and BNPL providers will be saying ‘we do have hardship policies in place’, but if you look at their hardship policies they’re very wishy-washy.”

Products still useful for some

Despite the concerns around hardship provisions and coronavirus support, Ms Rasmussen said these services can still be effective cash flow management tools.

But consumers should always check the terms and conditions, and weigh up all their other options, before committing to a purchase.

“We’re not saying these products are bad,” she said.

“If it does work for people’s individual financial situations then they should do it.

“But what we say to people is to consider what is possible for you and think about it before making a purchase.”