Insights / May 31st, 2023

‘If it walks like a duck and quacks like a duck, it’s a duck’ – Stephen Jones ends the debate; buy now, pay later is credit

On 22 May 2023, the Assistant Treasurer and Minister for Financial Services, Stephen Jones, announced that buy now, pay later (“BNPL”) will soon be regulated as a credit product. To most, this did not come as a surprise. As Mr Jones provided in his announcement, ‘BNPL looks like credit, it acts like credit, it carries the risk of credit’, it therefore only makes sense that it is regulated as credit.

An Options Paper issued by Treasury in November last year, set out three options for the BNPL reform:

1. To strengthen the BNPL Code of Practice (“Industry Code”) and require bespoke affordability assessments to be conducted.

2. To regulate BNPL under the National Consumer Credit Protection Act 2009 (“Credit Act”) with modified responsible lending obligations and strengthen the Industry Code.

3. To regulate BNPL under the Credit Act with all responsible lending obligations.

In his announcement, Mr Jones confirmed that the government has selected the second of these options. Under this option, BNPL providers will be required to:

• hold an Australian Credit Licence;

• comply with modified responsible lending obligations;

• meet statutory hardship and dispute resolution requirements;

• comply with information obligations; and

• abide by unacceptable marketing restrictions.

This, Mr Jones said, ‘will bring BNPL into line with other regulated credit providers, simplifying our regulatory system and addressing concerns about competitive neutrality.’

Treasury plans to engage in further consultation over the next few months, with a view to introducing a Bill to Parliament by the end of the year.

If you have any questions about how these changes will affect your business, please get in touch with the Cowell Clarke Financial Services Team at: Compliance@CowellClarke.com.au.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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