How to Stop Unfair Collection Practices From Afterpay Debt Collection

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Protect Your Credit and Fight Afterpay Debt Collection With DoNotPay

has risen since it rose to prominence among consumers at the height of the COVID-19 pandemic. To put that into perspective, in August 2019, Afterpay only had two million users in the U.S. By May 2020, the lender announced that the number had grown to over five million active users and 6,500 participating merchants.

Afterpay and its competitors were built on the "buy now, pay later" (BNPL) money-lending approach that has historically been unregulated. Most BNPL companies, including Afterpay, employ a system that allows users to pay four equal payments over six months. This is a far shorter time frame than what credit card companies provide, which is typically 36 months with an average APR of around 16%. Furthermore, credit card companies typically try a lot harder to work with debtors before reporting them to debt collectors.

Afterpay, on the other hand, never charges its users interest or a fee to use its service but is quick to report late payments as defaults. But you can protect your credit and fight Afterpay debt collection with DoNotPay.

How Does Afterpay Make a Profit?

While credit cards make their profit from interest, Afterpay charges a .30 cent flat fee for every purchase made through its payment gateway. Then there is also a four to six percent variable fee per transaction that is dependent on sales volume. The more a merchant sells, the lower the transaction fee. A little over 75% of Afterpay's revenue is derived from this source.

Three Important Things To Know About Afterpay

Founded in October 2014, Afterpay is an Australian-based financial technology startup that also operates in New Zealand, the United Kingdom, Canada, and the United States. In August 2021, Afterpay announced that it would be acquired by Block, Inc (formerly known as Square, Inc.) in March 2022 for approximately $29 million.

  1. Nearly 25% of Afterpay's Revenue Comes From Charging Late Fees

Afterpay generates revenue from Cost Per Click (CPC) advertising and foreign subsidiaries. But a large chunk comes from late fees as well. The company imposes a $10 penalty for missing a payment and then an additional $7 if the debt goes unpaid for another week. According to ABC News Australia, Afterpay made around 24% of its profit from late fees paid by users. In 2020, roughly 13% of its revenue was from late fees or close to $52 million.

  1. Afterpay Won't Report Successfully Paid Loan But Quick To Report Defaults

BNPL lenders such as Afterpay are more inclined to report loan defaults to credit-reporting agencies than they are successfully paid loans. This makes such borrowing a one-way street, with the borrower's only reward being able to purchase with either a soft credit check or none at all. But some BNPL may conduct a hard pull of your credit, which does decrease your credit score by a few points temporarily, according to Investopedia.

  1. Experts Warn that Companies Like Afterpay Are Harming Consumers

BNPL provides consumers with less protection than traditional lending options. This holds especially true for millennials and college students who make up 75% of all Afterpay users. Many of these users are struggling financially and are likely already knee-deep in various kinds of debt.

Critics of Afterpay have accused it of taking advantage of the financial difficulties brought on by the 2020 pandemic. The Australian Financial Review reported in November 2020 that "The Australian Securities and Investments Commission found one in five buy now, pay later users are missing payments, half of the users aged between 18 to 29 cut back on essential items to make repayments…”

How To Stop Afterpay Debt Collection On Your Own

Thankfully, the Fair Debt Collections Practices Act (FDCPA) protects consumers from these dreadful practices. The FDCPA requires debt collectors to observe strictly regulated guidelines. Some of these guidelines include but are not limited to:

  • Providing a written debt validation letter within 5 days of initial contact.
  • Responding to all debt verification requests and pausing collections until the debt is verified.
  • Not calling at unusual hours or places.
  • Not exposing that you owe debts to friends, family, and employers.
  • Communicate with your attorney if you have one rather than you.
  • Respect requests to stop all collection calls.

What Can I Do if a Debt Collector Contacts Me?

If you get a call from someone claiming to be a debt collector, just stay calm. Before you provide them with any personal information, verify their identity to be sure they're not scammers. The best way to verify the call is genuine is by asking the caller the name of the debt collection company and doing a quick search on the internet.

It would be a good idea to hang up with them and call the number provided on the company's website. When you reach someone, tell them that you're not negotiating anything until you receive a validation letter. Here are some additional recommendations:

Review Debt Validation LetterVerify the amount owed to the original creditor, what the debt was for, and the identity of the collector.
File a Debt Verification RequestIf you doubt that the debt is yours or if the statute of limitations on the debt is close to expiring. You can simply wait it out and ignore the collection.
Verified that the debt is yours
  • Pay off the debt
  • Ask the collector to stop contacting you. (Once you make this request, they are legally required to stop contacting you, but they may escalate the case with a lawsuit.)
  • Report them to the FTC and CFPB for unethical debt collection practices if you believe they've violated the FDCPA.

How To Stop Afterpay Debt Collection With DoNotPay

Not sure where to start? DoNotPay can help. Whether you were just recently contacted or have been harassed for months, DoNotPay can help you figure out whether your is compliant with the FDCPA. After guiding you through a series of questions, we'll help you determine what course of action you should take, and contact the debt collectors with a demand letter on your behalf. If you choose to report the collection agency to the CFPB instead, we'll file the complaint on your behalf. How it works:

  1. Search “debt collection” on DoNotPay.

  2. Answer a series of questions about the debt collectors, including when you were contacted and how you were contacted, so we can determine if they have violated any debt collection laws.

  3. Decide which course of action you want to take based on our guidance, such as filing a debt verification request, demanding for the collectors to stop contacting you, or reporting them to the CFPB.

And that’s it! Once you choose the course of action you want to take, DoNotPay will handle the rest. We’ll deliver your request directly to the debt collectors via first-class mail, or file your complaint automatically with the CFPB so that they’re no longer able to use unfair debt collection practices.

You can also check out our other credit products, including Credit Limit Increase and Clean Credit Report!

Why Use DoNotPay for Afterpay Debt Collection

You do not have to endure unfair collection practices. DoNotPay is the perfect choice to stop debt collection harassment because we are:

  • Fast- You don’t have to spend too much time researching solutions to your problems.
  • Easy- With only three steps we can prepare the proper resolution of your issues with Afterpay debt collections.
  • Successful- You can rest assured that we are making the best case for you.

If You’re Seeking Information on Other Debt Collection Issues, Check Out These Other Resources:

We’ve got you covered with our other products that seek to help you with debt collectors:

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