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Major buy now, pay later crackdown

Afterpay, Zip and other buy now, pay later services will soon be treated like credit products.

Afterpay and Zip sign. Buy now pay later. Australians shopping.
Buy now, pay later services like Afterpay and Zip will be treated like credit products. (Source: Reuters/Getty)

Major changes are coming for buy now, pay later (BNPL) platforms like Afterpay and Zip to better protect consumers from taking on debt they can’t afford.

The federal government has today announced that BNPL services will be treated as a credit product and regulated under the Credit Act.

The changes mean providers will need to have a credit licence, hardship requirements and minimum standards for conduct. There will also be caps on charges for missed payments and new marketing requirements.


BNPL services will be required to meet modified responsible-lending obligations, which the government said would be scalable to the risk level of the product.

Financial Services Minister Stephen Jones said Aussies were currently able to open multiple accounts and access more debt with BNPL services than they would with a credit card or payday loan.

"The plan will protect people from the spirals of harm that unregulated, unrestricted lending can cause," Jones said.

Last year, ASIC found around one in five BNPL consumers had cut back on or went without essentials in order to make their repayments. Evidence suggests the risks disproportionately affect women, First Nations communities and people on low incomes.

The bill will be introduced to parliament by the end of the year. The government said it would be working with industry and consumer groups on the details to make sure they got it right.


Financial Counselling Australia CEO Fiona Guthrie said there were concerns the approach didn’t go far enough to protect vulnerable consumers.

“Too many financial counselling clients have multiple BNPL accounts. The government’s approach will only work if there is a requirement for BNPL providers to be part of the credit-reporting system, to reduce the risk of over-commitment,” Guthrie said.

“It is wrong to assume that just because a loan is for a small amount that it is somehow a lower risk. Small amounts can cause big problems.”

Financial Rights Legal Centre CEO Karen Cox said it was “disappointing” BNPL would not be treated the same as all other credit.

“Great attention will be needed in the drafting of these obligations to make sure they address the harms we see every day. Small-amount, low-cost credit does not equal safe or sustainable lending,” Cox said.

Cox called on the government to ensure requirements on BNPL lenders were in legislation, rather than relying on the industry code of practice.

What does the change mean for consumers?

We don't have all the details yet. The government is planning to consult with providers and industry groups before it brings a bill to parliament later this year.

We know BNPL providers will have to comply with responsible-lending obligations and ensure the products aren’t “unsuitable” for consumers.

Consumers will also get caps on charges for missed payments, which could mean lower fees and charges. There will also be improved hardship processes, better dispute-resolution processes and tougher rules around marketing.

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