Spontaneous spending, easy debt and the slippery slope


Photo by Brooke Couper

Afterpay sign in shopping centre

Brooke Couper

Afterpay is all the rage. It’s a new-ish technology that allows consumers to spend more than they have available in their bank accounts, as long as there is enough money for the first payment. But how young is too young to be racking up debt like this?

Afterpay is an Australian company that launched its scheme as a website and app in 2015. It is now easily accessible via smartphone and android devices in Australia, New Zealand and the US and it boasts having over 3 million active users.

In basic terms, Afterpay charges retailers to offer customers interest-free installment plans – like a direct debit for shopping. For example, if a customer makes a purchase in-store or online for $100, they’ll pay installments of $25 every fortnight for two months.

The app generates a barcode permitting users a maximum spend amount encouraging responsible customer behaviour and the service remains free to customers who pay on time.

“In 2018, 95% Afterpay payments did not attract a late fee and were completely free to the customer,” according to an Afterpay spokesman.

Afterpay claims that it promotes responsible spending and that their research suggests the app can be used as a financial tool to teach budgeting.

Yet in my work in retail, I have refused the use of this service to several underage shoppers including a 13-year-old. This begs the question: Are other retailers cool with kids shopping with Afterpay?

NewsvineWA asked Afterpay for their take on it.

Firstly, in their Terms of Service for Australia, Afterpay states all users are to be over 18 years old and be the authorised holder of an eligible debit/credit card.

Clause 2.4 discusses users eligibility and states you must be 18, have a verifiable email address and an Australian mobile number. A valid delivery address must also be provided and you need access to a payment method.

According to Afterpay spokesman, external third-party ID verification is implemented and “While Afterpay can do everything within its power to prevent fraud from occurring, there will be instances in which people may fraudulently use another person’s real identification information (including ID documents) to sign up to the system.”

But all four major banks in Australia allow underage teens access to a debit MasterCard.

NAB rules out underage spending and according to their website you must be 18 or over to get a debit card online. However, with consent from a parent or guardian in a branch 14-year-olds can get a debit card.

Westpac states, if you’re 16 or over you can have a debit card.

You need to at least be 12 in order to apply for an ANZ access advantage account and if you’re 14 you can get a visa debit card.

According to a Commbank spokesman, young teenagers are able to open a smart access transactional account at the age of 14. This comes with a debit card, though they do not monitor for underage Afterpay accounts.

An Afterpay spokesperson told us that: “Illegal and inappropriate use of the Afterpay platform is acted upon, including the immediate suspension of accounts.”

The percentage of order requests that are declined is 30%, these declined payments can be due to lack of available funds, fraud or past payment track records.

“While every effort is made to help customers manage their repayments, in some instances customers simply don’t repay the balance of their account. An accessible customer hardship policy is in place for those who need support,” the spokesperson said..

The hardship policy states customers can contact Afterpay in order to establish a plan, however, the percentage of customers who never pay is 2.2%.

The spokesperson continued: “Despite its best efforts, Afterpay, as others do, does need to work with collections agencies in these instances. However, Afterpay retains ownership of the customer relationship, does not sell outstanding debt, and it does not report to credit rating agencies.”

That’s all very well, but it’s not giving a very clear picture about the young shoppers I see, and whether they are running up uncontrollable debts or using the service responsibly.

It would be good to see a bit more transparency from Afterpay on this issue.