Massive win for purchase now, pay later in competitors tribunal
The confirmation is a huge benefit for the FlexiGroup, which is renaming itself as Humm. Humm has financed around 10 percent of the total solar module market.
The decision will also give a boost to another growing operator in space, Brighte.
The decision could have a negative impact on non-bank lender Plenti, former RateSetter Australia, which plans to go public on the ASX. It has now campaigned against the purchase and subsequent payment in order to generate higher sales for its interest product.
Demand consumer protection
The decision is also welcomed by Afterpay and other buy-now providers who are later paying in the consumer space, as the Australian Securities and Investments Commission issues a new report on the fast-growing sector and the Australian Finance Industry Association is now developing a new purchase , pay later code of conduct.
Consumer groups have called for consumer protection measures to be added, including more detailed credit checks. However, Afterpay has stated that these are not required as the product’s design includes safeguards for consumers by cutting them off if they are late to repay.
The tribunal said Tuesday that the data before it “suggests that arrears and defaults on all types of finance granted in the new energy technology area are significantly lower compared to other sectors, likely due to the nature of the product (which generates energy bills savings) and consumer demographics (older homeowners) “.
It was recognized that the solar financing products were structured in such a way that installment repayments were made from savings when customers’ energy bills were reduced after the modules were installed.
“To the extent that such funding could alleviate consumer harm caused by poor or unlawful sales practices of new energy products, the risk of such harm should be significantly reduced by the consumer protection provisions of the proposed Code,” it said .
“The Tribunal believes that most of the restrictions proposed in the proposed Code on the provision of ‘buy now, pay later’ funding will create significant public disadvantages by reducing the availability of such funding to consumers, thereby reducing access the consumer is reduced to this [new energy technology] Products.”
Good credit risk
The tribunal said ASIC’s review of the sector would provide further evidence to see if an extension of the credit law to the consumer sector is warranted.
FlexiGroup, which has financed 180,000 solar panels over the past decade, argued that it should keep the flexibility not to have to investigate the financial condition of all customers as most were over 35 and were homeowners, which puts them at good credit risk made.
It has been argued that it was able to assess a customer’s repayable ability without the same income and expense documentation that would be required if a customer were to take out a mortgage or unsecured consumer loan.
The ACCC wanted to discourage solar sellers from buying now, paying for later products for unsolicited sales, and only letting them use them for solicited sales if the finance company meets the responsible credit obligations under the National Consumer Credit Protection Act. The products are operated outside the jurisdiction of the Credit Act as they do not charge interest.
However, the tribunal said it was “not satisfied that the code in its current form would likely result in net public benefit. Accordingly, the tribunal is unwilling to approve the code as presented to the tribunal.”
FlexiGroup had also argued it was concerned that the ACCC would break into the corporate regulator’s lawn.
It described the ACCC’s position as “regulation through the back door” and said it would have a “serious impact” on the “business and commercial profitability” of buying now, paying providers later.
It also states that the ACCC’s move “overrides ASIC’s position as a financial regulator and undermines the efforts ASIC has made and is making to oversee it.” [buy now, pay later] Financial sector to identify and address systemic problems “.