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Some Australian customers using Afterpay’s buy-now-pay-later (BNPL) service say they were told to shut down their accounts to qualify for a mortgage—only to be offered a credit card once approved, according to a company survey, highlighting growing tensions across consumer finance.
Afterpay, owned by Jack Dorsey’s Block, said more than 10% of 1,000 customers surveyed reported being asked by a bank or mortgage broker to cancel their BNPL accounts as part of the home loan process. The same customers said they were later pitched a credit card by those same institutions. Afterpay did not name specific banks or brokers.
BNPL services like Afterpay offer short-term, interest-free loans with minimal credit checks, a model that has become popular among younger consumers during the COVID-19 pandemic. But as banks tighten scrutiny of applicants’ liabilities, those same services are now coming under pressure.
Afterpay leads the BNPL market in Australia, with 3.5 million active users — half the country’s total BNPL user base, according to government data.
Lenders are required to assess a borrower’s financial situation before issuing a loan, though they’re not allowed to offer financial advice. Major lenders responded cautiously to the report. Commonwealth Bank and NAB told Reuters they do not ask borrowers to close BNPL accounts. ANZ said it reviews BNPL liabilities like any other debt and may suggest restructuring depending on the borrower’s overall situation.
Afterpay says banks are playing into perceptions that BNPL customers pose a higher credit risk in order to steer them toward traditional lending products. Interest-bearing credit card debt in Australia has fallen 30% over the past five years, as borrowers seek lower-cost alternatives.
The company insists that its users have repayment histories and credit scores comparable to credit card holders. It argues that BNPL is often misunderstood by lenders and brokers.
New regulation comes into effect Tuesday that will require BNPL providers to run credit checks on users — a step Afterpay supports. “This should not be something that is driven by misperception of the regulatory requirements,” said Michael Saadat, Afterpay’s Head of Public Policy.
The Australian government has long hinted that BNPL should fall under credit laws, noting last year that “if it looks and acts like credit, then it should be regulated as such.”
Mortgage broker AFG, which arranges around one in every ten home loans nationwide, said it does not distribute credit cards. But Mark Hewitt, general manager of industry and partnerships, noted that responsible lending rules require brokers to assess all existing financial commitments — including BNPL.
