Australia wants to regulate BNPL products as credit

The Albanese government has opened a consultation on draft legislation that would categorise BNPL products as credit in Australia.

The proposed measures will classify BNPL products as credit, subjecting providers to regulations similar to those governing traditional credit services. Under the outlined reforms, BNPL providers will be mandated to obtain an Australian Credit Licence and adhere to existing requirements mandated by the Credit Act. These requirements comprise aspects such as product disclosure, dispute resolution, and offering hardship assistance.  

Efforts to formalise regulations for the BNPL sector have faced delays since November 2022 when the government initially expressed its intention to oversee the industry. Pressure from financial institutions and regulatory bodies has been a significant driver behind these regulatory developments according to powerretail.com.au. 

The Assistant Treasurer and Minister for Financial Services cited by the same source emphasised the government's commitment to ensuring consumer welfare within the financial system. He highlighted concerns regarding the lack of regulatory oversight for BNPL products, citing issues like inadequate product disclosure, dispute resolution inefficiencies, excessive default fees, and potentially harmful lending practices leading to financial hardship. 

The government has opened a consultation period for interested parties to provide feedback on the effectiveness of the proposed legislation, with the deadline set for 9 April 2024.

Procedure for providing feedback

It’s worth noting that certain technical and operational provisions (including those dealing with the application, commencement and technological neutrality of the reforms) have been omitted for consultation. While submissions may be submitted electronically or via post, electronic submission is encouraged. Respondents are requested to send their responses via email preferably in Word or RTF format, with the option to include an additional PDF version if desired. 

All details provided in submissions, including name and address information, will be published on the Treasury website unless specified otherwise by the respondent. Automatically generated confidentiality disclaimers in emails do not fulfill this requirement. Respondents wishing to keep certain parts of their submission confidential are advised to clearly indicate this in a separate attachment.