Buy now pay later has emerged as a growing part of financial counsellors’ casework, with 24 per cent of respondents to a new survey reporting that most of their clients in financial hardship had debts with BNPL providers and 21 per cent saying about half their clients had BNPL debts.
Only 10 per cent of respondents to Financial Counselling Australia’s Rank the Bank survey said none of their clients had debts with BNPL companies.
The Rank the Bank survey, conducted every two years, collects and analyses the views of financial counsellors about the hardship practices of banks, debt collection companies and consumer lease companies. BNPL companies were included for the first time.
The survey was pre-COVID, having been conducted in December and January.
Counsellors were critical of the BNPL companies’ hardship arrangements, with one saying it is “difficult to navigate the hardship programs of all BNPL companies. It is too easy for clients to obtain a BNPL loan and they struggle to understand the implications.”
Another said: “They all need to lift their game. More checks as to the suitability of the lending will go a long way in preventing hardship in the first place.”
Among the BNPL companies, Deferit scored highest with a rating of 5 (out of 10) for the way it treats customers in financial hardship, followed by Afterpay (4.8), Zip (4.3), Latitude (4) and Openpay was the lowest with 3.9.
Among the big banks, Commonwealth Bank suffered a big drop in its rating. A third of respondents said CBA had got worse. It scored below the other big banks on issues such as overall communication, attitude to clients, client outcomes and consistency.
In their comments, counsellors said CBA had tightened its hardship policy, asking for more documentation which, in some cases, is difficult to obtain.
Overall, the big four banks received the highest average ratings. NAB received a rating of 7.3, ANZ 7.1 and Westpac 7. These ratings were largely unchanged from the previous survey.
CBA’s rating fell from 7.2 in 2017 to 5.9 in the latest survey.
Among small lenders, highly rated institutions included Bank of Sydney, with a score of 6.6, and Rural Bank (6).
Lenders with low scores included AMP Bank (3.9) and Latitude (5).
The scores for all non-major banks were higher in the latest survey, except Bendigo and Adelaide Bank (down from 5.7 to 5.3) and ING (down from 5 to 4.6).
FCA said: “We continue to be concerned by the ratings for the non-major banks and Latitude, which are generally much lower than those for the major banks.
“This has been called out since this survey series began and while it is good that the overall trend is up, the gap needs to close.”
Counsellors were asked about their interactions with bank customer advocates, a relatively new role designed to facilitate fair outcomes. Twenty-right per cent of respondents had not heard of them, 43 per cent had heard of them but not used them and 29 per cent had used them for assistance with a client.
Of those who had used a bank customer advocate, 74 per cent said they were either extremely helpful or fairly helpful.
Among debt collectors, Credit Corp received the highest rating of 7.8 – up from 6.9 in 2017. Panthera Finance scored 5.6 – the next highest score. The lowest score of 3.6 went to Prushka Fast Debt Recovery.