Financial Counselling Australia has called out what it says is “another alarming example of a fintech taking advantage of loopholes in credit laws” to offer a rental payment service with high fees.

A new business called Tenanting is using the buy now pay later model to offer tenants short-term loans to cover their rental payments. Tenants pay a 5 per cent fee and repay over four weeks with no interest.

FCA policy lead James Hunt said: “Some people will become trapped in a cycle of debt, as paying back the cost of the loan may mean they are caught short when the next rental payment is due.

“If you pay your rent weekly using this service, a cost of 5 per cent each week equates to 260 per cent a year.”

According to Tenanting’s website, it does not conduct credit checks on customers.

Tenanting co-founder Joe Chen said the criticism was unfair. A tenant must repay a rental advance in full over four weeks before applying for another advance. 

Chen said it would be impossible to use the service weekly and pay fees equivalent to annual interest of 260 per cent.

Tenanting was launched last year, offering landlords who want to deal directly with their tenants a direct debit service. The company launched its rental instalment product a couple of months ago.

The FCA is campaigning for the government to establish an independent review of new forms of credit, with a view to making them safer.