• Australia will impose new legislations on the BNPL sector
  • Providers will be subject to limited regulation under the Credit Act
  • Sector leader Zip Co welcomes the new regulations


Finally, Buy Now Pay Later (BNPL) companies have some clarity on what specific regulations would be applied to the industry.

Financial Services Minister Stephen Jones has revealed that BNPL providers will be treated as a credit product, in a speech to the Responsible Lending and Borrowing Conference this morning.

The decision comes after a Treasury paper in November put forward three options to the industry for assessment:

1. Self-regulation
2. Limited regulation under the Credit Act
3. Same laws as credit card providers

The government has opted for the middle option, or limited regulation, which means that BNPL companies will now have to determine whether their products are suitable for current users, as well as conduct an affordability test for new customers.

All BNPL players will also be required to hold an Australian credit licence.

In previous interviews, Jones had said that if it “looks like credit and acts like credit, then it carries the risk of credit”.

Jones acknowledged that BNPL services have a legitimate role to play in the credit ecosystem, but said that women, indigenous people, and those on low income have been adversely affected by the services.

“They are very popular, but we need to make sure that we manage them appropriately because the harsher impacts of these fall disproportionately on some elements of our society, and we don’t want that.”


What the new rules mean

Under the proposed legislation, there will be a cap on late fees charged for missed payments.

Any missed payments will have to be handled under an internal and external dispute resolution, which the providers will have to put in place.

BNPL providers will also have to offer hardship provisions to struggling customers.

Marketing rules will be toughened, and BNPL companies will no longer be able to raise a customer’s spending limit without an explicit instruction from the customer.

In addition, providers will have to comply with ASIC rules that ensure products are suitable for the target market they are being marketed to.

The Treasury paper said there were 7 million BNPL accounts in Australia, and most users were in the 20-35 age bracket.

“It appears that there is a small percentage of the market where people are getting into hot water,” Jones said.

“They love the convenience of buy now, pay later, but they want to know it’s safe. We need to find that happy medium, balancing consumer protection with innovative new products.”

The new legislation is expected to pass before the end of 2023.


How the market reacted this morning

Sector leader Zip Co (ASX:ZIP) says it supports the Minister’s decision to regulate BNPL under Option 2.

“We have long advocated for fit-for-purpose regulation, and we believe that Option 2 delivers the right level of consumer protection while still encouraging innovation across the industry,” said Zip’s co-founder and COO, Peter Gray.

Gray said the regulatory framework announced today formalises a minimum standard that Zip already complies with.

This includes requiring providers to hold a credit licence, conduct credit checks, provide access to external complaints services, and not increase credit limits without customer consent.

“With BNPL now well and truly established in Australia, this will provide clarity and consistency across the sector, deliver confidence to stakeholders and build on the already high levels of trust we have with our customers,” Gray added.

And here’s how other BNPL stocks are faring after the announcement:

Code Name Price % Today's Change % Today's Change MarketCap
FFG Fatfish Group 0.02 7.14 -48.28 $15,234,784
HUM Humm Group 0.43 1.19 -39.72 $211,761,702
CI1 Credit Intelligence 0.17 0.00 37.50 $13,777,361
DOU Douugh 0.01 0.00 -66.67 $7,871,187
LFS Latitude Group 1.29 0.00 -27.93 $1,341,182,869
NOV Novatti 0.14 0.00 -34.88 $47,411,916
OPY Openpay 0.20 0.00 -33.90 $45,403,853
PYR Payright 0.01 0.00 -88.09 $11,451,507
SQ2 Block 87.65 -1.74 -24.50 $2,671,037,180
SPT Splitit 0.11 -2.17 -62.50 $61,734,163
SZLDA Sezzle Inc. 21.25 -2.30 -4.41 $118,278,566
ZIP ZIP Co 0.55 -5.22 -37.36 $442,097,872
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