The way has been cleared for But Now Pay Later services to be regulated under national consumer credit laws, if recommendations from the Senate Economics Legislation Committee are followed.
The committee, which has been examining a wide-ranging series of legislative changes contained in the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024, tabled its report on 2 August.
This bill proposed – among many other changes, mostly unrelated to BNPL – amendments to the National Consumer Credit Protection Act 2009. These changes, if passed, will establish low-cost credit contracts as a new category of regulated credit.
This is crucial as most BNPL contracts are expected to be designated and regulated as LCCCs under the changes. That is, providers of both LCCCs and BNPL products would be required to hold and maintain an Australian Credit License, comply with the National Credit Act, and be subject to ASIC's powers to suspend, cancel and vary an ACL.
The legislation would also prohibit BNPL providers from restructuring their credit activities to avoid being caught by the low-cost credit regulations.
The new framework, if adopted in its current form, however, will not extend to entities that only accept or promote BNPL products, leaving the door open for merchants to provide unregulated BNPL services to their customers.
Many industry players, notably FinTech Australia, took issue with the modified responsible lending obligations framework for BNPL providers, arguing that it was too uncertain, and would force many to adopt the full RLO regime by default.
Also, inquiry participants were concerned over the "suitability assessment" requirements for BNPL providers under the modified RLO framework imposed. For example, Afterpay submitted that the product suitability requirements for BNPL arrangements were disproportionate to the nature of BNPL products and should be removed from the bill.
Despite such criticisms, the majority of the committee members – Labor's Senator Jess Walsh, along with Senators Deborah O'Neill, Jana Stewart and Nick McKim – stated that they "strongly support the reforms outlined" and therefore recommended the bill be passed.
Two Coalition members, the committee's deputy chair Senator Andrew Bragg, and WA Senator Dean Smith, attached "additional comments" that included a call for Treasury conduct a more detailed consultation on delegated legislation that accompanies the bill.
While theirs was largely an ideologically driven critique, it did reflect industry concerns that too much control was to be exercised through regulation rather than legislation.
The other measures outlined in the bill that were unrelated to the BNPL reforms were:
• Schedule 3 – Medicare levy exemption for lump sum payments;
• Schedule 4 – Multinational tax transparency, country by country reporting;
• Schedule 5 – Deductible gift recipients;
• Schedule 6 – National skills and workforce development payments; and
• Schedule 7 – $20 000 instant asset write-off for small business entities
The committee received 28 submissions and one supplementary submission for this inquiry, as well as additional information and answers to questions on notice, arising from the committee's one public hearing on 24 July 2024.