The terms and conditions of buy now pay later provider Openpay are coming under scrutiny from payments experts after the company revealed it was adding a major private hospital network to its list of approved merchants.
Openpay, which posted a A$25.6 million net loss for the six months to the end of December 2020, yesterday struck a deal with St John of God Health Care to accept its “Buy Now Pay Smarter” product as a payment method for patients seeking medical treatment at three hospitals in Melbourne and Perth.
Under the arrangement, Openpay customers will be able to fund up to $20,000 of hospital treatment and then repay the debt in instalments over two months to 24 months.
If a six-month trial at the three hospitals is a success, St John of God Health Care will extend Openpay’s service to 17 other hospitals in its network.
While the deal is a strategic milestone - being the first between a hospital operator and a BNPL provider – it might also be controversial given that Openpay’s standard terms and conditions appear to define the death of a BNPL customer as an act of default.
This might complicate the financial obligations of Openpay customers who suffer the misfortune of dying during a medical procedure in a St John of God hospital or die after they are discharged still owing funds.
Openpay reserves the right to terminate a credit contract in the event of default and to charge a dead customer’s account the outstanding balance and applicable fees within 14 days.
“On termination of this Openpay Credit Contract due to your default, you authorise us to charge the Outstanding Balance to your Nominated Card and you acknowledge that it may be necessary for us to charge your Nominated Card with such instalments and applicable fees individually,” Openpay states in its terms and conditions.
“This may mean the statement for your Nominated Card will list multiple debits charged by us that is equal to the Outstanding Balance and any other amounts you owe us.”
A spokesperson for Openpay last night confirmed that the company’s standard terms and conditions in Australia applied to the BNPL service to be offered to St John of God Health Care patients.
“Our standard terms and conditions apply to the “Buy Now, Pay Smarter” product offered by Openpay, including through our partnership with St John of Gold Health Care,” the spokesperson said in an email response to Banking Day.
“Importantly, from 1 March 2021, our standard terms incorporate the Buy Now Pay Later Code of Practice, which provides important safeguards for consumers, and of which Openpay was a founding member.”
Sydney payments expert Christos Fragias yesterday questioned the workability of the default scenarios involving Openpay customers who died while receiving medical treatment.
“Reading the terms and conditions, Openpay can seek restitution of outstanding balances from the deceased's nominated card,” he said.
“This begs the question, would banks not have frozen accounts of the deceased person pending the outcome of probate?”
Fragias, a former payments executive at the Royal Bank of Scotland, also noted that Openpay’s terms and conditions appeared to give it discretion to impose additional fees on dead customers who defaulted on their repayments, given death is an act of default under Openpay’s terms and conditions.
Openpay’s default conditions mean that the estate of a dead customer might immediately become liable for a lump sum payment – an event that St John of God Health Care indicated the partnership wanted to avoid.
“This partnership expands choice for these individuals and will provide a flexible alternative to self-funding procedures while minimising the burden of a lump sum payment for the cohort of patients that elect not to take out private health insurance,” said St John of God Health Care senior executive, Bryan Pyne.
“It provides these patients with more options to access private health care when they want it, allows them to choose their doctor and hospital, and to avoid long delays in accessing specialist care.”
Payments industry consultant Bradford Kelly said buy now pay later providers appeared to be moving into riskier business activities to generate revenue.
“There’s a high appetite for risk entering the buy now pay later market,” he said.
“If you died and were dealing with a bank your accounts would be automatically frozen whereas in this case it appears you could be in default.”