It will be harder for vulnerable Australians to access buy now, pay later credit schemes thanks to legislation introduced in federal parliament.
The law will create stronger protections for those using credit lenders by making sure adequate user background checks are completed and lending businesses have credit licences.
The government says buy now, pay later (BNPL) providers have not been adequately regulated by Australian consumer credit laws, meaning the businesses are not subject to complete affordability checks like those essential for credit cards and other loans.
The Australian Securities and Investment Commission has said that while the lending arrangements can be beneficial, “it is aware some consumers are incurring missed payment fees and report being financially stressed.”
The Responsible Buy Now Pay Later and Other Measures Bill was tabled by assistant treasurer Stephen Jones on Wednesday.
“Our approach to better regulating BNPL strikes an appropriate balance between preserving the benefits of access to low cost credit and addressing the risks of consumer harm,” Mr Jones said.
Fee caps for the credit lender users will be finalised with the implementation of the regulations.
“This legislation regulates BNPL in a proportionate way that provides necessary consumer protections while maintaining the essential benefits,” Mr Jones said.
“This will not change the underlying obligation not to provide credit unless it’s affordable and meets the consumer’s needs.”
Credit businesses providing fast loans to Australians without adequate background checks can leave the most vulnerable in crippling debt due to sudden interest, consumer advocacy groups say.
A survey from 2022 by not-for-profit charity Good Shepherd found that 73 per cent of practitioners said their clients had missed essential payments, or cut back on or gone without essentials, to service BNPL debt.
The same survey found that four in five financial counsellors have clients who try to manage debt by opening additional credit accounts.
Bray Boland
(Australian Associated Press)
