Afterpay changes: Afterpay customer receives unusual email following recent Buy Now Pay Later changes, including Afterpay credit checks

I’ve been an Afterpay customer since the company launched in 2015, and I remember the exact place and time I signed up.

That year, all three of my children needed two new pairs of school shoes, a black pair and a white sports pair, having either grown out of their previous pairs or torn them to shreds.

I had just enough for six of the most affordable pairs in stock at my local Athlete’s Foot in Castle Towers in Castle Hill, Sydney.

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The kids were being fitted up and I had my fingers crossed that they’d fit into the lowest-priced shoes so the six pairs would fit in my budget, when I saw the Afterpay sign explaining I would be able to make four payments spread out instead of all in one hit of $600-plus.

I was flooded with relief, and thus was my introduction to Afterpay, which I have been using on and off ever since.

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When I heard the Australian Government had amended the National Credit Act to extend the application of the National Credit Code to Buy Now Pay Later (BNPL) contracts, including Afterpay, my immediate thought was for existing users like me.

Following the changes, Buy Now Pay Later (BNPL) contracts will be captured by the definition of ‘credit contract’ under the code, meaning new customers to the platforms will undergo a credit check before being allowed access.

I assumed I wouldn’t be impacted by the changes, but wanted to check. My Equifax and Experian credit scores are in pretty good shape these days and I want to keep them that way.

In Australia, there are three main credit check agencies – Equifax, illion and Experian.

Lenders typically check one or all three of them before handing out funds to customers. You can check yours for free via the websites.

That same evening, I made a purchase using Afterpay and received a very long personal schedule email, which I assumed was due to the recent changes.

I worried I’d be receiving one of these emails following all of my Afterpay purchases going forward.

Changes to Afterpay

Afterpay has now assured me this won’t be the case, and explained the timing of the email was “coincidental” and such messages are sent to customers as per their previously existing schedule.

They also outlined their response to the changes.

“Afterpay Australia has introduced new unsuitability assessments in line with new regulations, which came into effect on June 10,” an Afterpay spokesperson told 9honey Money.

“Credit checks will apply to new customers on application, and generally to existing customers when assessing eligibility for increased spend limits.”

“This will involve conducting a credit check as well as requesting information from a customer about their financial situation (including income and expenses). This information helps Afterpay to meet its responsible lending obligations.”

They explained they will check customers’ credit reports in two instances:

• For new customers: “When a customer signs up, a credit check helps us assess their application for credit. We can’t enter into a credit contract without completing a credit check.”
• For existing customers: “We may perform a credit check when assessing whether a higher spend limit is appropriate for a customer. Without completing a credit check, we may not be able to assess you for a spend limit increase.”

“No – customers won’t receive the personalised schedule with every order. Current customers have been updated on changes to the Afterpay Terms which came into effect on June 10,” the spokesperson said.

“For completeness, Afterpay generated personalised Schedules, which included details such as the customer’s credit limit as at June 10,” they said.

”At Afterpay, we’ve always supported proportionate, fit-for-purpose regulation that puts customers first.

“We support consistent, transparent rules across the sector because when people are informed and protected, everyone wins,” they said.

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“We have now begun conducting credit checks for new customers and when customers are eligible for spend limits increase, in line with new BNPL regulations. These checks will show on credit reports but won’t impact your Experian credit score,” the spokesperson explained.

How the changes will impact existing Afterpay customers

Afterpay customers will “always be asked to consent to a check before it is made”, the spokesperson said.

“Furthermore, if customers do not want the higher limit that’s earned over time, they can always contact customer service and lower the limit.

“This option was available pre regulation coming into effect and is a part of Afterpay’s commitment to providing a flexible product that helps them manage their spend and avoid revolving debt.”

How the changes will impact BNPL products

“No previous BNPL applications will be added retrospectively to their credit history,” a spokesperson for Equifax told 9honey.

“A small number of BNPL providers will report additional information, such as repayments, on consumers’ credit reports which will also be factored into a consumer’s credit score.”

“BNPL providers need to ensure consumers are notified before sharing existing credit account information with a credit bureau. This is normally included in the Privacy or Credit Reporting Policy published on the credit provider’s website,” they added.

“It’s important to note that a large number of BNPL providers are already conducting the required credit check when a consumer applies for a BNPL product.

“Given the new rules, it’s more important than ever that consumers are conscious of how their BNPL use could impact their credit history.

“If consumers make payments on time, this could positively impact their credit score. On the flip side, falling behind on BNPL debts now could impact their eligibility for credit later in life.

Using BNPL as a budgeting tool

Carrie Cheung, Head of Insights at Equifax, told 9honey Money BNPL can be a great way for Australians of all ages to budget, as long as they make a plan for all of the payments resulting from a single purchase.

“I think the easiest trap to fall into is overcommitment … It’s easy to just agree to everything and you lose sight of what other repayments you’ve already got to pay,” she said.

“So, if you look at what BNPL offers, use it to your advantage. You can use it to budget … understand that you need to pay that in installments and put that money aside or have a budgeting management system going so you know what is coming up and manage it.

“It’s just like any other credit property. As long as you’re not falling behind, it’s not doing you any harm. And over time, you will have a good credit history.”

Her general advice for Australians when it comes to consumer debt is to avoid having multiple ones. That includes multiple BNPL lines of credit and credit cards, all of which are considered “unsecured loans”.

“So try to keep them to a minimum,” she said.

“If you don’t need a credit card, close it. If you don’t need that BNPL account, close it. Those are some of the things that will help you avoid the temptation of overspending.”

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

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