Consumer groups want to buy tighter now, pay curbs later

“Both Options 1 and 2 would create a tailored form of regulation for BNPL. Not only would this increase regulatory complexity; it would leave in place a number of the very legal loopholes that have allowed the emergence of BNPL products,” the filing reads.

“In all likelihood, within a few years the government would need to develop further regulations to stem a new wave of credit products designed to exploit these loopholes. That would be a perverse outcome to be avoided.”


The groups said the third option would address some of BNPL’s key issues, which it believes increase a consumer’s overall debt. These include ease of onboarding, the minimum amount of information required to open and use an account, and the ability to have multiple BNPL accounts at once, known as credit stacking.

In FY2022, the number of BNPL accounts in Australia grew from 5 million to 7 million, held primarily by people aged 18-34 through companies, and totaled US$16 billion in transactions, a Increase of 37 percent over the previous fiscal year .

While shares of listed BNPL providers soared at the start of the pandemic, they plummeted last year as investors feared consumers, particularly younger cohorts, would be unable to balance their balances amid rising interest rates and rising inflation repay.

Currently, nine BNPL providers, representing around 90 per cent of the market, have signed up to a voluntary industry code developed by the Australian Finance Industry Association (AFIA), but consumer groups say it should not be a substitute for legal requirements and safeguards.

When the Treasury Department’s options paper was published, several of the larger BNPL providers said they welcomed regulation but added that it had to be fit for purpose and proportionate. At least one of the biggest players is believed to have backed Option 2, the path the market is also banking on is being chosen by the government.

The AFIA, which counts the big BNPL among its members, said in December it was not opposed to regulation but that it had to be “right sized and reflect how things really work and how customers actually use them” and so on The framework should be “proportionate, scalable and targeted”.

The consumer-focused submission came from a coalition of 22 organizations including Financial Counseling Australia, CHOICE, Consumer Action Law Centre, a number of community law centers and charities including Anglicare, Brotherhood of St Laurence and St Vincent De Paul Society.

Financial Counseling Australia chief executive Fiona Guthrie said they had seen particularly last year, when the cost of living crisis put pressure on households, of people resorting to BNPL to pay for essentials but getting into financial difficulties as a result .


“Many of the people using BNPL have low and often precarious incomes and while loan amounts may seem small, they can snowball very quickly and the impact of failing to pay the debt is far from small” , she said .

In its December filing, the Public Interest Advocacy Center said its research found that BNPL and similar lending products were being used increasingly for essential things, including energy, and recommended that it shouldn’t be available for paying energy bills and consideration for Ban on their use to pay for other essential services.

The Consumer Action Law Center’s executive director, Gerard Brody, said the changes they are calling for would help prevent people from falling into a “debt spiral” that typically occurs after Christmas.

“Offering unsolicited credit means people end up in debt when they didn’t want the credit in the first place. It contributes to financial hardship and has already been banned for credit cards,” he said.

“We urgently need to treat all consumer credit products, including BNPL, in a consistent manner so that people have the same protections, whoever the provider is.”

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Brian Lowry

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