Financial Services Minister Stephen Jones recently announced a crackdown on ‘buy now pay later’ companies such as Afterpay & ZIP. The federal government is going to change the law to now classify these companies as ‘credit products’ which will result in tougher regulations. They will now have to meet certain elements of the Credit Act – which include complying with Responsible Lending Obligations and holding Australian Credit Licences.
There’s millions of Australians who have these BNPL services and if you’re one of them, you may be asking “what do these changes mean for me”? Well firstly, suitability and affordability checks will be put in place where these BNPL services will need to review your needs and ensure that your able to afford the repayments (like any loan). This will ensure that Australians can’t ‘open multiple accounts, getting access to far more debt than possible with a credit card or payday loan’. It’s reported that one in five customers are missing repayments so these new changes will hopefully irradicate that and ensure that customers don’t put themselves into financial stress. There are still some issues with the changes, mainly being that BNPL products still aren’t a part of the credit reporting systems. So, there’s concerns that customers will still be able to open multiple accounts with different companies. Whilst there are sure to be further developments in the future, these changes are a step in the right direction.
It is expected that draft legislation will be released for consultation later this year, and the Bill would be introduced to parliament before the end of the year.