The Government is seeking feedback on the future regulatory framework for Buy Now, Pay Later (BNPL) arrangements under the National Consumer Credit Protection Act 2009 (the Credit Act).
According to the Treasury website, BNPL products are not regulated under the Credit Act because they fall under the exemptions available to certain types of credit in Schedule 1 to the Credit Act (the National Credit Code).
BNPL products are also not subject to responsible lending standards or other requirements of the Credit Act, and BNPL providers do not need to hold an Australian Credit Licence (ACL).
The options paper 'Regulating Buy Now, Pay Later in Australia' is seeking views on three options that aim to provide a regulatory foundation for the future of BNPL in Australia.
One option is strengthening the BNPL Industry Code, as well as an affordability test. This option will impose a bespoke affordability assessment for BNPL providers under the Credit Act and address any other regulatory gaps in a strengthened Industry Code to make it fit-for-purpose.
Another option is limited BNPL regulation under the Credit Act. This approach would require BNPL providers to obtain and maintain an ACL, plus introduce modified Responsible Lending Obligations (RLOs) under the Credit Act to determine unsuitability, combined with a strengthened Industry Code.
Finally, the options paper proposes regulation of BNPL under the Credit Act, with full RLOs. Under this option, BNPL providers would need to obtain and maintain an ACL. The existing RLOs in the Credit Act will be applied to all BNPL credit, including requirements around reasonable inquiries into a consumer’s financial situation and taking reasonable steps to verify this information.
Submissions can be placed up until December 23.