The share prices of listed Australian buy now pay later stocks took another pummelling on Wednesday after the new Labor Government confirmed it would bring BNPL products within the purview of consumer credit laws.
In an interview with The Guardian, federal financial services minister Stephen Jones said it was time to regulate BNPL providers like other suppliers of credit services.
“Products like Zip and Afterpay, I think they’re a good innovation in the credit market,” Jones told The Guardian.
“Can we stop having an argument about whether [they’re] credit or not? It really is a dead-end street.
“Let’s start working on regulating [them] within the credit space. We welcome the fact that they’ve introduced a code, [and will] move to legislate it and fill any gaps.”
Jones’ comments contributed to another bleak day of trading in ASX-listed BNPL stocks, most of which have lost more than 80 per cent of their value in the last year.
Most BNPL stocks – including Zip, Sezzle, Openpay and Laybuy touched record intraday lows on Wednesday as support for the sector continued to slide.
Zip closed down 3 per cent to 63.5 cents. In February Zip’s scrip was trading around $2.50.
Openpay scrip, which had been trading above $1.70 a year ago, closed flat at 20 cents.
Consumer advocates that have campaigned for tighter regulation of buy now pay later providers such as CHOICE and the Consumer Action Law Centre, welcomed the government’s move.
“Buy now pay later is unregulated credit and is causing harm to consumers. We welcome closing this loophole as a priority for the new government,” said Alan Kirkland, the CEO of CHOICE.
“Governments in countries like the UK and New Zealand have recognised the need to protect people from these unregulated products. It is time for Australia to catch up.”
Gerard Brody from the Consumer Action Law Centre took aim at the BNPL industry’s code of practice, which he said offered few protections for consumers.
“The industry code has far too many gaps. It isn’t mandatory and there are many BNPL companies that haven’t signed up,” said Brody.
“There are only vague upfront assessment processes, that do not require the company to only provide loans that are affordable and suitable.
“Moreover, there is virtually no consequences for breaching the code – it does not contain sanctions or consumer rights equivalent to credit laws.”