If you’ve ever used Buy Now Pay Later (BNPL) accounts from companies like Afterpay, Zip and Humm to buy something you know that the process to get a BNPL account is usually quick and easy (…and much quicker than applying for a credit card or personal loan). But that convenience has also meant that some Australians have been left worse off because they struggle to repay their BNPL debt - especially when they have a few BNPL accounts at the same time.
To better protect Australians, the Government has changed the law so that BNPL will be subject to the National Consumer Credit Protection Act. By the middle of 2025, BNPL providers will need to follow the same credit laws that apply to credit cards, personal loans and home loans.
What’s changing:
- BNPL providers must be licensed by the Government regulator, ASIC, and join the Australian Financial Complaints Authority - giving customers access to free, fair and independent help if they end up having a dispute with their BNPL provider.
- BNPL providers must consider how they can help their customers if they get into financial difficulty and can’t repay the debt on time.
- BNPL provider will need to comply with ‘responsible lending’ requirements. These requirements mean that the BNPL provider must consider whether a customer will be able to afford the new credit; or more accurately, that the credit won’t be unaffordable.
The responsible lending requirements already apply to all other types of credit. The difference is that the new law lets BNPL providers take a simplified approach to working out whether the credit is likely to be unaffordable. This will help to ensure the convenience of BNPL is maintained.
Once the law comes into effect, if you apply for a BNPL account, you’ll be asked for information on your income and expenses; however, the details of the questions are likely to be less than you would be asked when applying for a credit card or home loan. Plus, you probably won’t be asked to provide the same amount of proof of your income and expenses, e.g. you probably won’t be asked to provide pay slips or bank statements (but that will depend on several factors, like the type/size of the BNPL account and your financial and personal situation).
The BNPL provider will also do a credit check to see what type of credit you currently have and how you have used that credit.
What is a credit check? A credit check is when a company reviews your credit report to see how you’ve managed loans and debts in the past. This helps them decide if they should approve your application.
What exactly is ‘BNPL’?
Buy Now Pay Later (BNPL) is a type of credit that helps you to buy things today and pay it off over time. ‘Credit’ is an arrangement where you owe money to someone else (i.e. a ‘debt’), and they agree to allow you to pay it back over time. ‘Credit’ is also called a ‘loan’.