BNPL products to be regulated as credit devices: Jones
‘Doing nothing is not an option’ as research finds women, First Nations communities and those on low incomes are disproportionately affected by BNPL debt.
Buy now, pay later (BNPL) products will soon be regulated as credit products with the government announcing its plan to change the law.
“Under our plan, which was listed as option two in our consultation paper, buy now, pay later providers will be required to:
- Hold Australian credit licences.
- Comply with responsible lending obligations.
- Meet statutory dispute resolution and hardship requirements.
- Comply with statutory product disclosure and other information obligations.
- Abide by existing restrictions on unacceptable marketing.
- Meet a range of other minimum standards in relation to their conduct, and in relation to their products.”
“And our plan will bring BNPL into line with other regulated credit providers, simplifying our regulatory system and addressing concerns about competitive neutrality.”
Mr Jones said the government had seen the growing popularity of BNPL products but also the risk associated with them that often impacted the vulnerable groups in society.
“Through its relatively low-cost offering, BNPL has also provided a valuable source of competitive pressure on traditional credit products, such as credit cards or payday loans,” he said.
“But with those opportunities have come new and growing dangers to consumers, which up until now have been largely unregulated and unchecked, and evidence suggests that those risks are disproportionately affecting women, First Nations communities and people on low incomes.”
“We have heard that some people are opening multiple BNPL accounts, to access far more debt than they’d be able to get on a credit card or a payday loans, and we have also heard that some people may be weaponising BNPL products in abusive relationships – doing things like coercing their partners to take on BNPL debts or taking out BNPL debts in their partner’s name without their knowledge.”
Mr Jones said “doing nothing is not an option” and referenced a study conducted by Good Shepherd in 2022 that found 73 per cent of financial counsellors said they had clients miss essential payments, cut back on essentials, and even go completely without to service their BNPL debt.
“Our legislation ensures that the obligations on BNPL providers are scalable and technologically neutral,” said Mr Jones.
“We will make sure they are the right fit for the risk level of their products.”
“Our plan prevents lending to those who cannot afford it, without stopping safe, prudent BNPL use.”
Simon Docherty, the chief customer officer at open banking fintech Frollo, said the proposed regulation was a positive step forward to help consumers and other lenders.
“The majority of BNPL and pay advance providers don’t perform credit checks or report the debt to credit bureaus, consequently these invisible debts make it difficult for other lenders to assess a borrower’s repayment capacity, potentially leading to lending to those who can’t afford it,” said Mr Docherty.
“We’re looking forward to the implementation of these newly announced regulations aimed at safeguarding vulnerable consumers.”
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