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The Treasury published 68 submissions on Thursday (16 February) as part of the government’s review into Regulating Buy Now, Pay Later in Australia.
As it stands, BNPL has not been regulated under the National Credit Act (the Credit Act) as providers do not charge interest on repayments and providers do not hold an Australian Credit Licence (ACL).
Given this, the federal government released a discussion paper in November 2023 following targeted consultations with a range of consumer groups, BNPL providers, retailers, financial services peak bodies, and regulators to identify the impacts and advise several changes.
The paper noted “inconsistent or inadequate complaint handling procedures” as well as “excessive or disproportionate consumer fees and charges” and “poor product disclosure practices”.
A total of 77 submissions were made, 16 of them confidential, as part of that consultation process.
Three of the four major banks, industry associations, regulators, and consumer advocates were unified in calling for an end to lending loopholes, however, with varying levels of regulations.
Westpac and the Commonwealth Bank supported the government’s ‘limited regulation’ option 2, while the ANZ supported the more stringent option 3 proposal by the government.
The government’s paper put forward three regulatory options that the government could take:
- Option 1: Strengthening the BNPL industry code and imposing an affordability test
- Option 2: Require BNPL providers to obtain and maintain an ACL, plus introduce modified responsible lending obligations (RLOs) under the Credit Act
- Option 3: Regulating BNPL under the Credit Act, with full RLO
Westpac stated in a submission that BNPL providers should “hold a credit licence” and achieve regulatory consistency across like-for-like credit products and supported option 2 as its baseline for regulation.
The Commonwealth Bank, which is an active participant in the Australian BNPL market with StepPay has also backed the government’s option 2, as previously stated alongside several lenders.
“CBA supports a model of regulation that resembles an enhanced version of Option 2, being the proposal to bring BNPL within Credit ACT and apply obligations to BNPL providers,” it said.
Meanwhile, ANZ supported option 3 as its preferred option for “consistent regulation of BNPL products”.
“The responsible lending obligations in the Credit Act are intended to accommodate different circumstances and products, and could effectively be applied to BNPL products,” ANZ stated in a submission.
More oversight of the credit sector
Meanwhile, the Australian Banking Association (ABA), which comprises 20 Australian banks, has called for more consideration of “the broader regulation of credit and credit-like products”.
The ABA’s view is that policy development in this area cannot be confined to an examination of BNPL without considering the broader regulation of credit and credit-like products.
“Our view is that it would have been better if the Options Paper had adopted a greater focus on alignment with the existing regulatory regime of credit products set out in the National Consumer Credit Protection Act 2009 (the Credit Act),” it stated.
For example, the ABA noted that option 2 and 3 only propose “a prohibition from increases to a consumer’s spending limit without explicit instructions”, which it supports but suggested that “further consideration be given to the merits of banning unsolicited BNPL limit increase offers”.
As such the ABA had raised concerns that “several important elements of the Options Paper require further detail, consideration and development” to ensure that the current regulatory regime is not embedded into legislation.
[Related: Lenders back BNPL regulation push]
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