Australia Mulls Regulating BNPL Like Credit Cards

As countries around the world look to regulate the buy now, pay later (BNPL) sector, Australia is considering rules that would treat the industry the same way as loan products or credit cards.

The country’s government is looking for input into three options that would place stricter guidelines on BNPL companies, the Sydney Morning Herald reported Sunday (Nov. 20). Assistant Treasurer Stephen Jones told the newspaper while the industry’s code of practice had worked well so far, it needs more oversight as the sector grows.

“Australians are some of the most enthusiastic adopters of new technology on the planet,” he said. “They love the convenience of buy now pay later, but they want to know it’s safe. We need to find that happy medium, balancing consumer protection with innovative new products.”

The BNPL sector in Australia — home to companies like Afterpay and Zip — is ballooning, with BNPL transactions accounting for about 2% of card purchases in the past financial year, adding up to about $16 billion, the report said.

However, the industry falls outside Australia’s Credit Act, which is why the government proposal suggests three options. First is a more hands-off approach with stronger self-regulation and affordability tests.

The second option would partially bring BNPL under the Credit Act, telling companies to obtain an Australian credit license and strengthen the industry code. The final option would make the industry fully regulated by the Credit Act, forcing BNPL firms to adhere to the same responsible lending standards as credit card companies.

Earlier this month, the government of Australia’s neighbor New Zealand signaled its belief that affordability checks should apply to BNPL loans greater than $600, providing consumers with the same protection they’d get applying for credit cards and personal loans.

“This is the right thing to do,” Minister of Commerce and Consumer Affairs David Clark said at the time. “As the global cost of living crisis puts pressure on New Zealanders and their families, we are taking action to help them avoid unmanageable debt, especially as the Christmas season looms.”

Clark said that BNPL is popular in New Zealand, with consumers there spending $1.7 billion on BNPL purchases in 2021, more than double the amount from the prior year.