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BNPL to Be Regulated as Credit

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By Published On: March 13, 20240 Comments

The Government has released draft legislation that will see the BNPL industry regulated as credit under the Credit Act.

The Albanese Government has opened consultation on draft legislation to regulate Buy Now, Pay Later (BNPL) products in Australia.

The draft legislation, released this week will categorise BNPL as credit. 

Under the proposed reforms, BNPL providers will be required to hold an Australian Credit Licence. They will have to comply with existing requirements under the Credit Act, including in relation to product disclosure, dispute resolution and hardship assistance.

The drafting of regulations and laws surrounding the BNPL industry have been long delayed since November 2022, when the government revealed their intention to regulate the $18 billion industry amid rising pressure from banks and regulatory bodies.

According to Stephen Jones, Assistant Treasurer and Minister for Financial Services, the government is committed to a financial system that leads to good consumer outcomes with appropriate safeguards in place.

In a statement posted this week, the Hon Stephen Jones MP elaborated on why regulation is necessary. “The emergence of BNPL products has created new opportunities in the Australian economy. The Australian Finance Industry Association has estimated that BNPL adds as much as $18.4 billion to GDP and supports more than 120,000 jobs.

“At the same time, BNPL isn’t subject to the regulatory framework that applies to other credit products. This can lead to poor product disclosure, inadequate dispute resolution processes, excessive default fees and unaffordable lending practices that lead to hardship and financial stress.

That’s why the government is taking action to regulate BNPL. The draft legislation released today amends the law to bring BNPL into line with other types of credit. This will ensure Australians can continue to enjoy the benefits of BNPL while receiving appropriate protections.”

The government welcomes interested parties to provide feedback on the effectiveness of the draft legislation up until 09 April 2024. The Buy Now Pay Later regulatory reform proposal can be found here – https://treasury.gov.au/consultation/c2024-504798

About the Author: Rosalea Catterson

Rosalea is the Editor of Power Retail. With a keen interest in consumer behaviour and tech, she covers everything ecommerce and hosts the Power Retail Power Talks Podcast.

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