5 June 2024

Government introduces consumer protections for Buy Now Pay Later

The Albanese Government will today 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.

When consumers do get into trouble, they might 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
  • mean operators will need to comply with existing credit laws, regulated by ASIC
  • 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 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.

A 2022 survey by the Good Shepherd found 84 per cent of financial practitioners reported that their clients had tried to manage the debt by opening additional BNPL accounts, leading to an unmanageable debt spiral.

The new laws get the balance right between consumer protection, innovation and competition.

The Albanese Government is acting to protect people from the damage that harmful lending can cause. These changes build on our reforms to make small amount contract credit and consumer leases safer and better regulated for people who chose to use them.

Quotes attributable to Assistant Treasurer and Minister for Financial Services, Stephen Jones MP:

“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.”