A leading critic of the buy now pay later sector believes the Reserve Bank should have moved several years ago to review the surcharging ban that service providers such as Afterpay impose on retailers.Payments consultant Grant Halverson said the ban had always been inconsistent with the surcharging principle that the RBA established when it reformed the interchange arrangements on credit cards.In 2003 the RBA forced Visa and Mastercard to remove rules in their schemes that restricted the ability of retailers to recoup the cost of accepting payments from customers using their credit cards."Given all the background to the interchange reforms more than a decade ago, you would have expected the regulator to move on this before the buy now pay later sector's sales got to six billion dollars," Halverson said.Since the RBA's Payments System Board revealed last week that it would investigate the impact of surcharging bans in the buy now pay later sector, the ASX-listed shares of Afterpay and Zip have been pummelled.The two stocks were out of favour again on Monday, each closing down by 3 per cent and 5 per cent, respectively.The prospect of having to compete on a more equal footing with other payments instruments  - in terms of surcharging arrangements - appears to have imperilled the outlays of investors who ploughed into the stocks in recent months.Afterpay scrip has slumped 22 per cent since the middle of last week when a UBS report questioned the sustainability of the company's business model.Retailer peak bodies including the Australian Retailers Association have long argued that their members are cornered by no surcharge rules that mean Afterpay and others in its cohort extract merchant fees equivalent to 4 per cent of transaction values.Apart from creating a competitive advantage for BNPL providers against credit cards and other payment methods, Halverson said financial regulators had been dragging the chain on regulating to protect millennials who are more prone to using the new services.Research published last year by ASIC found that only one BNPL provider - believed to be Zip - conducted credit checks on applicants to assess their capacity to repay debts. "ASIC needs to move much more quickly to address the indebtedness of millennials who are more likely to be attracted to buy now pay later services," he said."In November last year an ASIC report highlighted that only one out of six BNPL providers were doing checks on new customers to see if they were creditworthy."I think that is astonishing."Afterpay yesterday responded to the RBA's decision to review rules in BNPL schemes that prevent surcharging by retailers.In a feisty announcement to the ASX, Afterpay noted that Australia was one of the few advanced economies that allowed merchants to surcharge customers for accepting credit and debit cards."Australia is one of very few OECD countries where surcharging fees are permissible and subject to regulation," the company told the ASX."Since January 2018, surcharging fees have been banned for retail credit and debit card transactions across all member states of the European Union including