The Albanese Government has passed legislation to regulate Buy Now Pay Later (BNPL) services as formal credit providers, requiring BNPL providers to comply with the same consumer protection laws as banks and other lenders. The legislation aims to protect Australians from debt spirals and reduce the risk associated with BNPL products.

BNPL, an Australian innovation, has around 7 million active accounts across the country. However, a 2022 report by the Australian Securities and Investments Commission (ASIC) revealed that 19% of BNPL customers showed two or more indicators of financial stress.

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

Under the new laws, BNPL providers will be required to hold an Australian Credit Licence and comply with the National Consumer Credit Protection Act 2009. They will also need to become members of the Australian Financial Complaints Authority, providing an independent dispute resolution mechanism for financial complaints.

The legislation will amend the Credit Act to require BNPL providers to hold an Australian credit licence and comply with existing credit laws, regulated by ASIC. The law will establish a new category of 'low-cost credit' under the Credit Act, reflecting the lower risk and cost of BNPL compared with other regulated forms of credit.

The Australian Finance Industry Association estimates that the BNPL sector supports more than 120,000 local jobs and contributes up to $18.4 billion to GDP. A 2022 survey by the Good Shepherd found that 84% of financial practitioners reported that their clients had tried to manage the debt by opening additional BNPL accounts.

Jones said: “Our changes are balanced and proportionate and maintain the consumer benefits afforded by BNPL products.”