Cash-strapped people will be pushed towards riskier payday loans, buy now, pay later and debt consolidation products, the head of the Australian Securities and Investments Commission warns.
Cost of living pressures and rising interest rates will push people towards riskier credit products such as payday loans or buy now, pay later services, the head of the Australian Securities and Investments Commission has warned.
Mr Longo said the financial pressure on households was likely to significantly increase in the first half of the year as the Reserve Bank of Australia’s interest rate rises had their full impact.Borrowers rolling off low fixed-rate mortgages onto higher variable-rate loans, rising energy costs and general inflation would add to household budget pressures, he said.
“Some may have a limited ability to do this, given that low-income and highly indebted households typically have lower savings buffers.”Mr Longo said ASIC would also call for “much stricter” regulation of buy now, pay later providers, in an upcoming submission to Treasury’s consultation that is reviewing the laws.
A middle ground – likely the most realistic for the sector’s 7 million accounts – would bring BNPL partly into the Credit Act.Providers would be required to hold an Australian Credit Licence and follow responsible lending obligations, with a sliding “unsuitability test” applied to products.
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