Submissions to Treasury on proposed regulation for buy now, pay later providers show diverging ideas about the best way forward.
A middle-ground option for regulating buy now, pay later has attracted support from the biggest bank and second-largest buy now, pay later operator, as the government prepares to draw up keenly anticipated reform proposals to regulate the sector as credit.
Australia’s regulatory response to buy now, pay later is being closely watched globally as regulators offshore seek to lift user protections, afterCBA is backing a more accommodative regulatory approach for Afterpay than rival Westpac. The bank suggested additional measures including “mandatory obligations around credit reporting and tighter restrictions on credit limit increases”.Zip already conducts upfront customer credit checks compliant with responsible lending laws – its product provides customers with a spending limit, similar to a credit card. Afterpay does not do upfront checks – its model brings users onto the platform quickly and determines appropriate credit limits once they start to use it.
The ABA said Treasury should have “adopted a greater focus on alignment with the existing regulatory regime of credit products”. Financial Counselling Australia, on behalf 22 consumer groups, called on the government to adopt option three, regulating buy now, pay later like traditional credit. Its submission details users carrying multiple accounts running into trouble, including from automatic spending limit increases.
It said basing regulation around the AFIA code, and potentially a strengthened version of it, was appropriate because it already recognised that different levels of customer credit checking was required, based on the size of buy now, pay later facilities. “This aligns with our view that responsible lending obligations should apply to BNPL products as they have the potential to contribute to financial stress,” the bank said.“We also think it is imperative for BNPL liabilities to be included in the credit reporting regime.”
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