David Johnson said you should reconsider your buy now, pay later use from today as new regulations kick in for the industry. (Source: Supplied\/AAP) <\/p>\n
Australians who use buy now, pay later (BNPL) services<\/a> have been warned new regulations coming into force from June 10 could have huge implications on their future<\/a>. While these platforms have been game-changers<\/a> for people running a little low on cash<\/a>, they’re now operating under the same rules as credit cards<\/a> and personal loans.<\/p>\n That means services like Afterpay, Klarna, and Zip<\/a> will conduct stricter checks before giving you the money, along with more oversight and big consequences if you don\u2019t stay on top of repayments<\/a>. David Johnson, CEO of credit reporting firm Talefin, told Yahoo Finance these new laws could push many away from using BNPL services.<\/p>\n “If you have any doubt about your ability to make repayments, you should reconsider using BNPL,” he said.<\/p>\n His warning stems from how missed payments will now impact your credit score.<\/p>\n Up until today, BNPL platforms weren’t forced to report your payment history to big credit score firms like Equifax or illion.<\/p>\n Lenders can use your credit score to determine whether you’re a suitable candidate for a mortgage, personal loan, or credit card.<\/p>\n Do you have a story? Email stew.perrie@yahooinc.com<\/strong><\/p>\n BNPL can already be a red flag for some lenders, whether you’ve kept up with all your payments or not.<\/p>\n However, this update will mean lenders will have even more information about how you handle cash advances. These platforms will now have to report every misstep, stumble, or rough month.<\/p>\n “If possible, try to make sure you have more capacity than you need to repay debts, because you never know when unexpected bills might arise,” Johnson told Yahoo Finance.<\/p>\n “The biggest potential impact on your creditworthiness will be your failure to meet your repayment obligations.<\/p>\n “If you do run into trouble making repayments, over-communicate with your credit provider.<\/p>\n “If you are getting into a hardship scenario, more often than not, they will work with you to remedy the situation.”<\/p>\n Applying for a BNPL service will also be harder from today.<\/p>\n For some of the platforms, you only had to fill out a few details and tick a few boxes before you had the money in your account.<\/p>\n But now these providers will have to assess your ability to repay before approving your request.<\/p>\n They will follow the same rules as credit card companies and lenders by looking at your income, expenses, and existing debts.<\/p>\n Story Continues <\/p>\n This is designed to stop people from falling into debt traps that they can’t crawl out of.<\/p>\n Finder research released last year found 41 per cent of Australians had used BNPL in a six-month period.<\/p>\n Gen Z and Millennials were the most likely to use these services compared to older generations.<\/p>\n Shockingly, one in three had missed another bill in order to afford their BNPL repayments, while 12 per cent had gone as far as skipping a meal.<\/p>\n The University of Sydney found approximately 40 per cent of BNPL users operated more than one BNPL account, which can increase the risk of overextension and financial stress.<\/p>\n Afterpay also reported more than 10 per cent of surveyed users were advised to close their BNPL accounts and subsequently qualified for a mortgage or were offered a credit card.<\/p>\n The government wanted to bring these BNPL services in line with other credit providers.<\/p>\n Assistant Treasurer Stephen Jones said it gives these platforms “clear obligations” to ensure “vulnerable consumers” don’t get credit when they shouldn’t.<\/p>\n He added that it will also result in enhanced requirements for transparency in fees and charges to help Aussies understand the full cost of these services.<\/p>\n It’s also aimed at creating a level playing field across the credit industry.<\/p>\n Johnson told Yahoo Finance that you should check your BNPL platform’s privacy policy to see whether they report to Equifax or illion.<\/p>\n They are two of the most popular credit reporting firms and are used by a raft of lenders and credit card companies.<\/p>\n “If you find you are struggling to access credit for a more substantial purchase (such as a home loan), make sure you understand why,” he said.<\/p>\n “For example, do you have a good credit history? Are you asking for an amount that you can service?<\/p>\n “If you are not having success with a mortgage broker, try working directly with a credit provider or lender.<\/p>\n “Most credit providers will use a score to filter consumers through their broker network, but they will often apply different criteria to direct customers.”<\/p>\n Get the latest Yahoo Finance news – follow us on <\/strong>Facebook<\/strong><\/a>, <\/strong>LinkedIn<\/strong><\/a> and <\/strong>Instagram<\/strong><\/a>.<\/strong><\/p>\n Australians have been using BNPL services a lot in the last few years to get ahead in the cost-of-living crisis. (Source: Getty) \u00b7 Rafael Ben-Ari via Getty Images <\/p>\n