Closing the Regulatory Gap

Buy Now Pay Later (BNPL) services have rapidly grown in Australia, with transactions valued at approximately $19 billion in 2022-23 (about 2% of all Australian card purchases). Until now, these services have operated outside traditional credit laws because they don't charge interest, instead generating revenue primarily through merchant fees and late payment charges.

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, which received royal assent on 10 December 2024, addresses this regulatory gap. From 10 June 2025, BNPL providers will need to comply with a modified version of the National Credit Code, ensuring appropriate consumer protections while recognising the unique nature of these products.

"We want Australians to enjoy the benefits of BNPL, while knowing there are strong consumer protections in place," said Assistant Treasurer and Minister for Financial Services Stephen Jones. "If it looks and acts like credit, then it should be regulated as such."

Key Changes for Consumers

The new legislation provides several important protections for BNPL users:

• BNPL providers must hold an Australian credit licence and be regulated by ASIC

• Providers must assess whether their products are suitable and affordable for consumers

• Consumers gain access to proper hardship assistance and dispute resolution through the Australian Financial Complaints Authority (AFCA)

• Protection from unsuitable lending through modified responsible lending obligations

These changes address growing concerns about consumer harm. The Australian Financial Complaints Authority received 1,929 complaints involving BNPL providers in 2023-24, a 16% increase from the previous year. A 2022 survey by Good Shepherd found that 84% of financial practitioners reported clients trying to manage debt by opening multiple BNPL accounts, leading to debt spirals.

Balancing Protection with Innovation

The legislation recognises the value BNPL has brought to the credit market, creating a new category of 'low-cost credit' with proportionate regulations that reflect the lower risk compared to traditional credit products.

Under this approach, BNPL providers will face less onerous requirements than traditional lenders while still maintaining core consumer protections. The Australian Finance Industry Association estimates the BNPL sector supports more than 120,000 local jobs and contributes up to $18.4 billion to GDP.

AFCA Chief Ombudsman David Locke welcomed the legislation: "This legislation extends important consumer protections to BNPL users that have been available for other forms of credit. It also ensures any consumer using BNPL can come to AFCA, as an independent umpire, if they can't resolve a dispute."

[1] https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r7199

[2] https://ministers.treasury.gov.au/ministers/stephen-jones-2022/media-releases/government-introduces-consumer-protections-buy-now-pay

[3] https://asic.gov.au/about-asic/news-centre/news-items/asic-alerts-buy-now-pay-later-providers-to-apply-for-a-licence-under-new-laws/

[4] https://www.afca.org.au/news/latest-news/afca-welcomes-passing-of-legislation-extending-consumer-protections-to-bnpl