The Australian government is preparing a law that would require providers to carry out basic credit checks on new customers.
According to a Finder survey, adoption of BNPL products from companies such as Afterpay, Klarna and Zip has increased significantly in Australia in recent years, with around 40% of people using them in the first half of the year.
The government says it recognizes the competition that BNPL has created in the credit markets, but points out that most of these products are not currently covered by the National Consumer Credit Act.
To solve this problem, a change to the law is planned so that providers must have a credit license and comply with existing check laws.
However, the legislation will also introduce a new category of “cheap credit” under the Act “to reflect the lower risk and cost of BNPL compared to other regulated forms of credit.”
This differs from the US, where the CFPB recently released its interpretive decision declaring that BNPL lenders should be treated the same as credit cards, prompting opposition from some, including Klarna.
Deputy Treasurer and Minister for Financial Services Stephen Jones MP says: “We want Australians to enjoy the benefits of BNPL, although we know there are strong consumer protections in place.” If it looks and acts like a loan, then it is it should also be regulated as such.
“Our changes are balanced and proportionate, preserving the consumer benefits that BNPL products provide.”
Peter Gray, CEO of Zip ANZ, said: “Zip has long been a champion of fit-for-purpose regulation that supports strong customer outcomes. We welcome the Federal Government’s announcement and the introduction of these standards, which are aligned with Zip’s existing practices.”