The Australian government’s move to extend consumer credit regulation to the Buy Now Pay Later (BNPL) sector marks a significant development toward enhancing consumer protection. Originally exempt from traditional credit laws due to their ‘lay by’ status, BNPL services, pioneered by companies like Afterpay, will now require providers to obtain an Australian Credit Licence. This shift follows a decade-long evolution, culminating in the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024.
Under the new legislation, BNPL providers must conduct responsible lending checks before offering finance, aligning them with general licensee obligations and consumer credit laws. This adjustment responds to findings of potential consumer harm highlighted by ASIC’s 2018 report and subsequent industry debates. The government’s approach, influenced by a balance of consumer benefit and regulatory oversight, emphasises protection against overcommitment and financial hardship.
Key provisions of the Bill introduce concepts like ‘low-cost credit contracts’ (LCCCs), encompassing BNPL agreements, thereby eliminating previous exemptions for short-term credit. Modifications include enhanced disclosure requirements and adjusted responsible lending criteria tailored to BNPL products. These changes are set to reshape operational and compliance frameworks for BNPL providers.
As the industry prepares for these regulatory shifts, BNPL providers are advised to evaluate their licensing needs and adapt to new compliance standards promptly. For those navigating these changes, seeking legal guidance and proactive adaptation will be crucial in ensuring continued compliance and operational resilience in the evolving financial landscape.
For the full article, see Andrew Ham and Harriet Whitely’s LinkedIn Article – Consumer credit reform comes Now not Later to BNPL providers | LinkedIn