The Albanese Government will introduce new consumer protection legislation for Buy Now Pay Later (BNPL) that will see BNPL operators regulated as consumer credit.
Most BNPL products are not currently covered by the National Consumer Credit Act (Credit Act) meaning these providers are not subject to the same consumer protections such as affordability checks that apply to other forms of credit such as credit cards and loans. Consumers might also not have access to effective dispute resolution and hardship processes.
The new legislation will amend the Credit Act to require BNPL providers to hold an Australian credit licence. It will also mean operators will need to comply with existing credit laws, regulated by ASIC.
The government will establish a new category of ‘low‑cost credit’ under the Credit Act, to reflect the lower risk and cost of BNPL compared with other regulated forms of credit.
BNPL providers will still need to consider whether a product is suitable and affordable for consumers.
The government confirmed it recognises the competition BNPL has introduced into credit markets, allowing consumers access small amounts of credit and the sectors contribution to the broader economy.
The Australian Finance Industry Association estimates it supports more than 120,000 local jobs and adds up to $18.4 billion to GDP.
Assistant Treasurer and Minister for Financial Services Stephen Jones said the new laws aim to balance consumer protection, innovation and competition.
“The government is working hard to protect consumers against financial harm.
“We want Australians to enjoy the benefits of BNPL, while knowing there are strong consumer protections in place. If it looks and acts like credit, then it should be regulated as such.
“Our changes are balanced and proportionate and maintain the consumer benefits afforded by BNPL products.”