Australian govt consults on BNPL regulation
The Australian Government is seeking feedback on the future regulatory framework for buy now, pay later (BNPL) arrangements under the National Consumer Credit Protection Act 2009.
BNPL products are not regulated under the Credit Act because they fall under the exemptions available to certain types of credit in Schedule 1 to the Credit Act. BNPL products are not subject to responsible lending standards or other requirements of the Credit Act, and BNPL providers do not need to hold an Australian Credit Licence (ACL).
This unintended regulatory gap creates the potential for consumer harm due to the absence of key protections available to other products regulated by the Credit Act.
The options paper Regulating Buy Now, Pay Later in Australia is seeking views on three broad options that aim to provide a regulatory foundation for the future growth of BNPL in Australia.
Options for regulatory intervention
- Option 1: Strengthening the BNPL Industry Code plus an affordability test. This option will impose a bespoke affordability assessment for BNPL providers under the Credit Act and address any other regulatory gaps in a strengthened Industry Code to make it fit-for- purpose.
- Option 2: Limited BNPL regulation under the Credit Act. This approach would require BNPL providers to obtain and maintain an ACL, plus introduce modified Responsible Lending Obligations (RLOs) under the Credit Act to determine unsuitability, combined with a strengthened Industry Code.
- Option 3: Regulation of BNPL under the Credit Act, with full RLOs. Under this option, BNPL providers would need to obtain and maintain an ACL. The existing RLOs in the Credit Act will be applied to all BNPL credit, including requirements around reasonable inquiries into a consumer’s financial situation and taking reasonable steps to verify this information.
Interested parties can submit responses to the consultation up until 23 December 2022.