Monday proved to be a bad day for ASX buy now, pay later (BNPL) shares as a new report found that BNPL services are worsening the burden of financial hardship on some consumers.
Let's take a look at what might have weighed on ASX BNPL shares today.
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ASX BNPL shares tumble on Monday
The share prices of Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P), and Sezzle Inc (ASX: SZL) each tumbled into the red on Monday.
Sezzle reported the worst fall. It slid a whopping 15.61% to trade at $3.19 at the close on Monday.
The Zip share price also tumbled 9.73% to close at $4.36.
Despite spending most of the day in the red, the Humm Group Ltd (ASX: HUM) share price finished flat at 74 cents.
Meanwhile, Afterpay shares slipped 4.13% to trade at $94.18 after announcing the new date on which shareholders will vote on its acquisition by Square Inc (NYSE: SQ).
In comparison, the S&P/ASX 200 Index (ASX: XJO) lifted 0.13% higher in late trading after being in the red most of Monday. The All Ordinaries Index (ASX: XAO) wasn't so lucky, falling 0.11%.
ASX BNPL shares might have been weighed down by findings released by Financial Counselling Australia today. The body found BNPL companies are failing to support customers in hardship.
BNPL increasingly used by those in financial hardship
FCA has called on the Australian Government to review the legal framework used by BNPL providers, and on the BNPL industry to improve how it treats customers in hardship, after it found a sharp increase in the use of BNPL services by those in financial distress.
FCA CEO Fiona Guthrie said current laws allowed customers to mishandle BNPL services:
BNPL can be used quite happily… but it can also be misused, and that's because it falls outside of our credit laws.
What we need are safeguards, we need to find a way of making sure that this product operates in a safe way.
The body surveyed financial counsellors, finding 84% reported more than half of their clients had BNPL debt. That compares to just 31% 12 months ago.
Particularly noteworthy, respondents reported many people burdened with BNPL debt didn't consider it to be debt. Thus, the debt often wasn't reported to financial counsellors or services.
It reported Australians are increasingly using BNPL to purchase essentials such as food and bills. It also found that many prioritised BNPL repayments over essential expenses so as to not lose access to the services.
National Debt Helpline financial counsellor Deb Shroot also commented:
What we're seeing is that, clients have maybe a credit card, a couple of personal loans, and… numerous BNPL products. This could be up to seven or eight different BNPL products from different companies…
We're getting phone calls about BNPL products every single day.
Financial counsellors were also asked to rate different BNPL providers' hardship practices with 1 being awful and 10 being brilliant.
Of those rated, the ASX's largest BNPL share, Afterpay came out on top. It was given a rating of just 5.9 out of 10.
Zip's hardship practices were rated 5.5 out of 10 while Humm was the worst rated service provider – it was given a rating of 4.7 out of 10.
