The Federal Government has announced it will be regulating the buy now, pay later sector under the Credit Act following its investigation.
Under new laws proposed today, the Federal Government will require buy now, pay later organisations to conduct credit checks on customers as the services would be regulated as a consumer credit product.
The Australian Securities and Investments Commission (ASIC) will regulate the sector. There will be requirements for the companies to employ internal and external dispute resolution, offer hardship provisions to struggling customers, and there will be tougher rules on marketing. This regulation requires buy now, pay later (BNPL) products meet modified Responsible Lending Obligations under the Credit Act to determine unsuitability, combined with a strengthened Industry Code, with details and legislation to be drafted for consultation later this year and a Bill to be introduced by the end of the calendar year.
“BNPL looks like credit, it acts like credit, it carries the risks of credit,” Financial Services Minister Stephen Jones said in a speech in Sydney on Monday.
“Our plan prevents lending to those who cannot afford it, without stopping safe, prudent BNPL use.”
Buy now, pay later company Zip already requires credit checks for some products and has accepted the news as “business as usual.” Zip, alongside Commonwealth Bank had earlier aligned themselves with this option when the government released guidance suggesting three options for regulation following an investigation into the sector. The first option, which was rejected, was that the services remain largely self-regulated, the second, which was chosen today was that the services be subjected to limited regulation under the Credit Act, and the third option which was also rejected was that the services be subjected to the same laws as credit card providers.
Australia’s biggest buy now, pay later provider, Afterpay has welcomed the announcement, with a spokesperson telling ABC News, the change was a “strong first step in the development of a fit-for-purpose buy-now-pay-later regulatory framework”, and that the industry will be involved in consultation of legislation drafting. “We look forward to working with the government, consumer groups and other stakeholders to get the details right in the coming months and build on the many consumer protections we already provide and set high industry standards across the board for all providers of a BNPL service,” the Afterpay spokesperson said.
hummgroup has similarly welcomed the announcement, releasing a statement today reading, “hummgroup believes that this regulatory framework, outlined in response to the Treasury Options Paper, represents a balanced and proportional approach to ensuring consumer protection and promoting responsible lending practices within the BNPL sector.”
The ecommerce landscape is changing. With a Power Retail Switched On membership, you get access to current e-commerce revenue and forecasting, traffic levels, average conversion rate, payment preferences and more!