The Albanese government will regulate buy now, pay later schemes as credit products, due to the “growing dangers” of cash-strapped consumers getting too far in debt.
The assistant treasurer, Stephen Jones, announced the reforms on Monday, warning the risks of BNPL “disproportionately [affect] women, First Nations communities and people on low incomes”.
Jones said that BNPL is a “fintech success story” with some 7m active BNPL accounts in Australia, and praised it as “a valuable source of competitive pressure on traditional credit products, such as credit cards or payday loans”.
“But with those opportunities have come new and growing dangers to consumers, which up until now have been largely unregulated and unchecked,” he said.
Jones said “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”, and partners are “weaponising” BNPL in abusive and coercive relationships.
Jones said that according to a study conducted by Good Shepherd in late 2022, around 73% of financial counsellors said that clients have missed essential payments or cut back on essentials to pay off BNPL debt.
“BNPL looks like credit, it acts like credit, it carries the risks of credit.”
He said government consultation revealed concerns including: the quality of dispute resolution and hardship processes, excessive fees, poor disclosure practices, problematic marketing practices and unsolicited credit increases.
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Jones announced a “strong and proportionate” solution to regulate BNPL “as credit products”.
This includes requiring providers to: hold Australian credit licences, comply with responsible lending obligations, meet statutory dispute resolution and hardship requirements, comply with statutory product disclosure and other information obligations, and abide by existing restrictions on unacceptable marketing.
“Our plan prevents lending to those who cannot afford it, without stopping safe, prudent BNPL use.
“There are consumers out there who have been excluded from traditional forms of credit, and who use BNPL carefully and frugally, to smooth the impact of large expenses, like when the fridge needs replacing or one of the kids has a birthday coming up.
“Some people use it for years and never miss a payment. We don’t want to make life harder for them.”
Jones said the government would release exposure draft legislation out for consultation and introduce a bill by the end of the year.
Asked if BNPL providers would be required to stop extending credit to existing customers in circumstances that don’t meet responsible lending requirements, the treasurer, Jim Chalmers, told Radio National there would be “appropriate transitional arrangements”.