Limit the strictest rules to credit products over $5,000, Zip says

The second would bring BNPL partially under the National Consumer Credit Protection Act, requiring providers to obtain an Australian credit license and comply with a tailored version of responsible lending laws. Responsible lending obligations would be scaled to the risk level of the BNPL product or service.

The third recommendation would bring the sector fully under the Credit Act and would extend the responsible lending obligations that apply to credit card issuers to BNPL operators as well.

More than a dozen consumer groups, charities and community rights centers have supported the third option, arguing that the other two options would create a “tailor-made form of regulation” for BNPL and leave a number of loopholes that would continue to be exploited to harm consumers.

In its filing, Zip – which already holds a credit license due to its origins as a credit provider – argues that while it aims to improve consumer protection, it also wants to ensure BNPL products remain accessible to consumers, as well as competition and innovation in the marketplace Industry is not slowed down.

The third option was discarded because it would impose a large cost on BNPL providers to conduct affordability checks by examining one or more sources of financial information, including payslips, Centrelink statements or bank statements.

Zip offers two main products: Zip Pay, an interest-free BNPL product with an unregulated line of credit of up to $2000, and Zip Money, a product with a line of credit of up to $50,000 that is regulated under the Credit Act.


The company already performs identity and credit checks on all Zip Pay customers, as well as affordability checks on approximately 90 percent of Zip Pay customers. With that in mind, Gray said that if the third option were chosen, Zip would require minimal changes to its operations.

“It would mean a bit more friction at the point of sale if we included customers, but we’ve shown we can do that in relation to our regulated product,” he said. “Rather, we are committed to appropriate regulation for the entire industry.”

BNPL companies like Zip and rival Afterpay were market darlings last year but have since been swept by a wave of negative forces, including high bad debts, growing competition, falling technology valuations and pressure from rising interest rates. Zip’s share price is up 25 percent year-to-date after falling more than 80 percent over the past 12 months.

Gray said on Tuesday investors were warming again to BNPL companies heading into 2023, with regulation bringing certainty to the market and the larger players showing they have the ability to do well in times of volatility to lead.

“[Regulation] offers reassurance, instills confidence, offers consumer protection and simply takes away much of the noise that often surrounds the industry, which is very focused on a small number of negative outcomes, as opposed to the benefits provided to millions of Australians fed up with banks and interest rates and are looking for better, more transparent ways to make their payments and manage their lifestyles,” Gray said.

Zip will release its quarterly trading update next week. Gray said the company made some adjustments to its risk settings in light of economic conditions and market volatility, which helped limit losses on loans gone bad.

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Brian Lowry

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