The federal government will regulate buy now, pay later (BNPL) schemes as credit products, due to the “growing dangers” of cash-strapped Australian consumers falling into debt.

Assistant Treasurer and Illawarra Labor MP Stephen Jones announced the reforms on Monday (22 May 2023), warning the risks of BNPL “disproportionately affect women, First Nations communities and people on low incomes”.





Mr Jones said BNPL is a “fintech success story”, with some 7 million active BNPL accounts across the country, and praised it as “a valuable source of competitive pressure on traditional credit products, such as credit cards or payday loans”.

But with those opportunities have come new and growing dangers to consumers,” he said.





Following a consultation process, the Australian Labor government has decided BNPL services will need to meet certain elements of the Credit Act — which include complying with Responsible Lending Obligations and holding Australian Credit Licences.

BNPL providers will also have to meet statutory dispute resolution and hardship requirements, comply with product disclosure obligations, and follow existing restrictions on marketing their products.

The changes boil down to the fact the BNPL industry has “largely gone unchecked and unregulated", while the products have been causing serious harm to Australian consumers – according to a 2020 report by the corporate watchdog, ASIC.






The report noted 19 per cent of customers had been cutting back on essentials, or going without them altogether, and one in five consumers were missing payments, with some taking out additional loans to make up the shortfall.

Additionally, 18 per cent of BNPL users in Australia have missed a repayment, compared to 17 per cent of credit card holders – according to a 2022 report by The Australian Finance Industry Association.

"These accounts tell us that doing nothing is not an option,” Mr Jones said.

“BNPL looks like credit, it acts like credit, it carries the risks of credit.”

The biggest BNPL player, Afterpay, has welcomed the changes put forward by the federal government.

"[The] announcement from the government is a strong first step in the development of a fit-for-purpose Buy Now Pay Later regulatory framework that embeds effective consumer protections, generates positive outcomes for consumers and businesses, and provides certainty for industry," an Afterpay spokesperson said.


User comparisons between BNPL services by Ashleigh Wright // UOWTV


Treasury says it is going to work closely with the BNPL industry and consumer groups, and will iron out further details about how the regulation will work in the coming months.

It’s expected exposure draft legislation will be released for consultation later this year, and the Bill will be introduced to parliament before the end of 2023.


With reporting from Scarlett Box.