‘The only avenue left’: Buy now, pay later used for food, bills

The report, Paying to pay: Using credit products to afford energy, said the federal government’s plans to regulate buy now, pay later needed to include requirements for lenders to ensure loans were repayable.

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Assistant Treasurer Stephen Jones recently announced the government would bring buy now, pay later products under the Credit Act, but without applying requirements that apply to other types of credit.

It will apply a tailored version of responsible lending obligations, which will require providers to assess buy now, pay later “is not unsuitable” for a customer. Lenders will also be required to hold an Australian credit licence.

There will be further consultation with the industry and consumer groups on the legislative drafting. Buy now, pay later products are lightly regulated because they do not charge interest, exempting them from the Credit Act.

Financial Counselling Australia chief executive Fiona Guthrie said because many clients had multiple buy now, pay later accounts, the government’s approach would only work if it required providers to be part of the credit reporting system, to reduce the risk of over-commitment.

“It is wrong to assume that just because a loan is for a small amount that it is somehow a lower risk. Small amounts can cause big problems,” she said.

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