The government’s draft legislation on regulating buy now, pay later (BNPL) products under the Credit Act is a welcome development, but concerns remain, according to consumer groups.
CHOICE, along with 10 other consumer and financial groups such as Financial Counselling Australia, Indigenous Consumer Assistance Network and Consumer Action Law Centre, has responded to the government’s consultations on draft legislation with a submission urging the government to finalise reforms “as a matter of priority” this year.
If BNPL is going to be sold with only partial safe lending laws applying, the laws need to do more to ensure BNPL products are actually safer
CHOICE and other advocates in a submission to government
“We are not convinced that the intention of proportionate regulation that introduces meaningful safeguards has been achieved. To remedy this, the [draft] must be amended so that BNPL products present less risk for consumers,” the submission reads.
“If BNPL is going to be sold with only partial safe lending laws applying, the laws need to do more to ensure BNPL products are actually safer,” it says.
In announcing the draft legislation in March this year, Financial Services Minister Stephen Jones said BNPL services would be required to take steps to make sure they are lending responsibly.
“This requirement will operate in a way that is flexible, adaptable and proportionate to the risk of consumer harm,” he said.
CHOICE’s head of policy Tom Abourizk says the reforms would require BNPL providers to be members of the Australian Financial Complaints Authority so that consumers have access to dispute resolution.
“Passing the draft legislation would dramatically improve the consumer protections that currently apply to BNPL,” he says.
More should be done to genuinely ensure BNPL is a lower risk product
CHOICE head of policy Tom Abourizk
But there are other areas where the reforms fall short.
“More should be done to genuinely ensure BNPL is a lower risk product if safe lending assessments that apply to other credit products are not required. This could be done by limiting the maximum value of BNPL loans or prohibiting actions such as securing BNPL debts over property or initiating bankruptcy proceedings over BNPL debts,” he says.
Abourizk adds that the current legislation draft prioritises speed of lending approvals for the industry, rather than accuracy.
“The laws will help many consumers, but some people will still be sold BNPL that will leave them worse off, and they won’t have any right to recourse,” he adds.
Jarni Blakkarly is an award-winning Investigative Journalist at CHOICE. Jarni has worked for news organisations such as SBS, Reuters, Al Jazeera English, ABC 730, Radio National, BBC World Service and Deutsche Welle.
Jarni won the Walkley Foundation's young journalist of the year student category award in 2016 and was the recipient of a Melbourne Press Club Michael Gordon fellowship in 2022. In 2023 he was a highly commended finalist in the Quill Awards and a winner at the 2024 Excellence in Civil Liberties journalism awards. In 2024 he was elected to serve on the Federal Council (National Media Section) of the MEAA.
Jarni has a Bachelor of Communications (Journalism) from the Royal Melbourne Institute of Technology (RMIT).
Find Jarni on Twitter and LinkedIn.
Jarni Blakkarly is an award-winning Investigative Journalist at CHOICE. Jarni has worked for news organisations such as SBS, Reuters, Al Jazeera English, ABC 730, Radio National, BBC World Service and Deutsche Welle.
Jarni won the Walkley Foundation's young journalist of the year student category award in 2016 and was the recipient of a Melbourne Press Club Michael Gordon fellowship in 2022. In 2023 he was a highly commended finalist in the Quill Awards and a winner at the 2024 Excellence in Civil Liberties journalism awards. In 2024 he was elected to serve on the Federal Council (National Media Section) of the MEAA.
Jarni has a Bachelor of Communications (Journalism) from the Royal Melbourne Institute of Technology (RMIT).
Find Jarni on Twitter and LinkedIn.
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