Buy now, pay later to face tough new regulation under credit laws

In a copy of his speech obtained by this masthead before the summit, Jones said, while BNPL had brought benefits to consumers and businesses, providing a source of competitive pressure on traditional credit products, there were growing dangers for consumers.

“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 loan,” he said. “Last year, the Australian Securities and Investments Commission found that 19 percent of BNPL consumers showed two or more indicators of financial stress, such as cutting back on essential items or missing payments on other bills.”

“Doing nothing is not an option. BNPL looks like credit, it acts like credit, it carries the risks of credit.”

Stephen Jones, Assistant Treasurer

Jones also said some people may be weaponising BNPL products in abusive relationships, this could include coercing their partners to take on BNPL debts or taking out BNPL debts in their partner’s name without their knowledge.

“Doing nothing is not an option,” Jones said. “BNPL looks like credit, it acts like credit, it carries the risks of credit.”

But Jones also said the issue was complex, and that while the government’s plan would give ASIC “strong enforcement powers,” it would consult industry on the detail.

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“While BNPL customers are more than twice as likely to end up in financial trouble as a credit card customer, the risk is only half as big as for consumer leases and payday loans,” he said. “Our plan will bring BNPL into line with other regulated credit providers and ensure that the obligations on BNPL providers are scalable and technologically neutral. We will make sure they are the right fit for the risk level of their products.”

Consumer groups last year largely supported the third option in Treasury’s discussion paper on BNPL regulation which would have brought the sector fully under the Credit Act, making responsible lending obligations applied to credit card providers also apply to BNPL.

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