AfterPay is something many of you have been asking for over the past 12 months. At first I was reluctant about offering people another way to get into debt - especially a service that makes it really easy to get credit, really quickly. It kind of encourages impulse buying, which can be good for me in the short term (Yay sales). But when my customer has to start paying it back, it might be painful. The last thing I want is for people to look at their lovely linen and resent it because they have to go without food / heating / whatever for the next 6 months to pay it off. I don’t want to be associated with buyer’s remorse.
Anyway, after ruling it out well over a year ago, I revisited the idea a few months back after getting more emails from customers. As we started to see the fallout from the banking royal commission and we began to understand just how poorly our banks treat their customers, I felt like a hypocrite. I wouldn’t offer Afterpay but you could get into as much debt as you like with your bank-issued credit card… And often with far more severe consequence if you defaulted. Is it better to have no credit card and a small Afterpay account or vice versa? The reality is that our big banks have a shedload of power and if you get on the wrong side of them, they can ruin your life.
So I emailed Afterpay to find out more about how they do business. I wanted to understand how they dealt with hardship and default. Here are all my emails and their responses:
I run a small online business - www.mrdraper.com.au and my customers have been asking if I'm going to get Afterpay. I would be happy to implement it however I have requested some additional info and have never heard back from Afterpay. My contact was XXXXXX who originally contacted me but never responded after I asked the below:
My main concern is how are people who undergo financial hardship treated and what happens to their debt if they can't pay? Is it sold on and are they hassled by a debt collection agency? Do they receive a black mark on their credit files? As someone who aims to run an ethical business this is important to me. Appreciate if you can provide your process for customers undergoing financial hardship to help put my concerns at rest.
Thanks and all the best.
Thanks for contacting us.
As you could imagine Afterpay takes on a lot of risk, so the merchant doesn't have to. If a customer is experiencing hardship we do have processes in place for them. At the moment Afterpay doesn't effect a customer credit report, this is how we are able to offer the service for free.
If a customer doesn't make payment on their account, after a period of time the overdue account gets sent through to one of our agency, as we don't have the facility to chase up debt so we outsource this to get debt paid.
We do find the vast majority of our customers have great accounts, as they wish to continue to use the service, and it is only a small amount that falls overdue.
If a customer does find themselves needing assistance all they need to do is reach out to us for assistance.
Thanks XXXXXX. Really appreciate your time following this up for me. That has put my mind at ease on a lot of points. And has made me consider offering Afterpay far more seriously. One more question, do you know / have any processes / requirements in place for the outsourced debt collection to ensure they are being ethical (not harassing folks too much)? Do you partner with particular organisations that have good / better practices?
The main issue I'm wrangling with, and please don't take any offence, is how ethical offering folks another way to get into debt is. I know that sounds hypocritical as I take credit cards for payment (and I am struggling with that too). In the past I probably naively thought that the banks would only give credit to folks that could manage it, but as we are seeing in the banking royal commission that is far from the truth... At least the process of getting a credit card takes time and cuts out some of the impulse purchasing perhaps? I'm mainly focussing on this, as when I was younger I dug myself into a debt hole via too easy credit. Maybe a small Afterpay loan would be better than a large credit card?
Thanks again for taking the time to follow this up.
All the best!
Chief Linen Crafter
When customers accounts fall behind, and are overdue for a period of time they do get outsourced to a third party collections agency. These agencies are there to assist our customers, and if customer contacts them they can set up a suitable payment arrangement. They do what they can to assist customer in making payment.
An Afterpay order won't be approved if a customer has already got an overdue payment, and each customer account will have limits and this is dependant on their repayment history. So if customer has had many late payments they won't be approved for as much, but if a customer continues to make payment on time then their limit increases.
Everybody should be taking responsibility for themselves and their own finances. However we understand life happens and this is why we have the hardship process.
If you complete the online application form, someone from our sales team will be able to reach out to you to discuss how to get started with offering Afterpay as a payment method.
What I took away from this, is that the consequences for one of my customers defaulting on their Afterpay payments is far less than if they default on their credit card. If you default on your credit card, the bank will put a black mark on your credit file for a LONG time. Afterpay doesn’t go on your credit file. Sure, you will get hassled by a third party collections agency but realistically, apart from hassling you on the phone, they can’t do anything and it won’t have any lasting impact on you (no black mark to stop a future mortgage, say).
There is still the issue of providing easy credit and this is something I’ve needed to mull over. After many months, I’m more OK with it. I don’t like it, but I also really don’t like forcing people to have a bank-issued credit card.
The reality is that I run an online business, so people need a way to pay online. I offer trades for all of my products. While I can’t always do them straight away, or in full, I will do my best to work with you. I want to give people information and options to empower them to make the best decision for their circumstances. Just because I’ve been a bit hopeless with money shouldn’t mean that I make financial decisions for my customers.
So after all that I will begin offering Afterpay, probably within the next fortnight. If you have any feedback or thoughts please let me know. Leave a comment below or drop me an email. The beauty of being an online business is that it’s super easy to add Afterpay – and it’s just as easy to remove it if it doesn’t live up to our expectations.
You can see more about Afterpay responsible spending policies here.