Legal development

Government announces buy now pay later products to be regulated as credit products

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    On 22 May 2023, in an address to the Responsible Lending & Borrowing Summit, the Assistant Treasurer and Minister for Financial Services announced that the Government will change the law so that buy now, pay later (BNPL) products are regulated as credit products.

    Late last year, Treasury released its consultation paper on regulating BNPL products in Australia (Consultation Paper).  The Consultation Paper sought feedback on three options for a regulatory framework for BNPL products.  Of these options, the Assistant Treasurer and Minister for Financial Services today announced that the Government will proceed with option 2.

    This means that BNPL providers:

    • will be required to hold an Australian credit licence or be appropriately authorised;
    •  must comply with tailored responsible lending obligations;
    • must comply with most general obligations of a credit licensee (such as the efficiently, honestly and fairly obligation, and statutory dispute resolution and hardship requirements); and
    • must comply with statutory product disclosure and other information obligations.

    Also, the merchants who offer BNPL products to consumers will be required to be an authorised representative of the BNPL provider.

    The Assistant Treasurer and Minister for Financial Services stated in his address that it is key to the Government's plan that the responsible lending regime applies to BNPL products.  The intention of the Government's plan is that the tailored responsible lending obligations which will apply to BNPL providers will be scaleable and technologically neutral, and will be the right fit for the risk level of BNPL products.

    The Government intends to have the exposure draft legislation out for consultation later this year, and introduce the final Bill into the Parliament by the end of the year.

    Authors: Narelle Smythe, Partner; Samantha Carroll, Partner; and Geena Davies, Senior Associate.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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