With retail sales of $18.4 billion attributed to the loosely regulated buy now pay later credit sector, the Australian Retailers Association is anxious that regulatory reforms will be, as promised, “proportionate”.
“We believe retailers should be able to offer choice to their customers in all areas of their business, including payments” the ARA told Treasury in a submission on Buy Now Pay Later regulatory reforms.
“BNPL products will most likely continue to grow in popularity [and] not all merchants will or should pass on these costs, but we believe they should have the ability to do so.”
Providers of low cost credit contracts, including buy now pay later companies, will have to hold a credit licence and comply with modified responsible lending obligations under proposed changes to the National Consumer Credit Protection Act and the Credit Code.
The Albanese government released an exposure draft of Treasury Laws Amendment Bill 2024: Buy Now Pay Later in March.
The government must be wary of drafting the final version of this bill in a manner that either stifle, or fails to allow for, innovation, the Australian Retail Credit Association said in its submission to Treasury.
“The reform package appears to be driven by a focus on the types of BNPL currently available” Michael Blythe, general manager for policy and advocacy at ARCA wrote in its submission.
“There seems less focus on what product or service innovations may occur because of the reforms.
“The reforms will legitimise the provision of regulated BNPL products by providing clarity and certainty.
“However, there are elements of the of the proposed laws that may act to limit competition.”
Blythe highlighted white-labelling as one such domain of concern.
ASIC took issue with one clause in the draft bill, around determining whether the BNPL provider has met their obligation to make reasonable inquiries about the consumer under s130 of the National Credit Act.
Under s130 consideration must be given to whether the BNPL provider has “any policies in place” that reduce the risk of it providing unaffordable credit or reduce harms if the licensee provides credit on terms that are not affordable for the consumer.
ASIC argued: “The mere existence of such policies, regardless of their quality or effectiveness, should not be considered when assessing whether a BNPL provider has made reasonable inquiries. We suggest that changes be made to impose an ‘adequacy’ standard to the policies and require consideration be given to the degree to which the BNPL provider is consistently applying the policy.”
BNPL providers, naturally, are cautious about the reforms.
Fintech Australia argued for “adopting the approach of similar activity, similar risk, same regulatory outcomes.
“Without this additional clarity and certainty, there is some concern as to whether the modified Responsible Lending Obligations framework effectively provides any relief from the requirement to adopt a full-scale approach to RLOs.
“In other words, without sufficient clarity and certainty, some providers of BNPL products and arrangements will err on the side of caution and adopt a full-scale approach to RLOs – thereby negating what would otherwise be the potential benefit of offering an opt-in RLO framework.”