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Australia introduces BNPL rules

Australia introduces BNPL rules

Australia's government is prepping legislation that would require buy now, pay later providers to carry out basic credit checks on new customers.

Australia has seen take up of BNPL products from firms such as Afterpay, Klarna and Zip soar in recent years, with around 40% of people using them in the first half of the year, according to a Finder survey.

The government says it recognises the competition that BNPL has brought into the credit markets but notes that most of these products are not currently covered by the National Consumer Credit Act.

To address this, it is planning to amend the act so that providers are required to hold a credit license and comply with existing laws about checks.

However, the legislation will also establish a new category of ‘low‑cost credit’ under the Act "to reflect the lower risk and cost of BNPL compared with other regulated forms of credit".

This differs from the US, where the CFPB recently published its interpretive ruling, declaring that BNPL lenders should be treated in the same way as credit cards, prompting push back from some, including Klarna.

Assistant Treasurer and Minister for Financial Services, Stephen Jones MP, says: “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.”

Zip ANZ CEO Peter Gray says: “Zip has been a longstanding advocate for fit-for-purpose regulation that supports strong customer outcomes. We welcome the Federal Government’s announcement and the introduction of these standards, which are aligned with Zip’s existing practices."

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 June, 2024, 11:36Be the first to give this comment the thumbs up 0 likes

Does it mean BNPL providers in Australia were not doing even basic credit checks until now? When I first tried Bill Me Later, which pioneered BNPL, it asked me for DOB and SSN to carry out basic credit check. This was in 2008. Per anecdata, BML rejected around 25% of applicants due to poor credit.