Australia Plans Tougher Regulatory Obligations For The Buy-Now-Pay-Later Sector.

Buy Now Pay Later will be regulated in Australia
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The Australian Financial Services Minister Stephen Jones told The Australian Financial Review that the government would introduce lending obligations for the Buy-Now-Pay-Later (BNPL) sector. BNPL providers will need to assess whether their products are suitable for customers. Additionally, they will be required to hold an Australian credit license. The government will further consult providers and consumer groups to finalize the legislative drafting.

BNPL in the EU in in the UK: BNPL is a point-of-sale loan provided by the BNPL provider that enables consumers to purchase goods (usually online) with a simultaneous postponement of the payment date. Regarding the regulation of BNPL providers in the UE, the current state of the financial regulatory framework is far from harmonized. The existing regime based on the Consumer Credit Directive generally does not apply to the most common credit structures that BNPL providers use. In the UK, where BNPL models generally fall outside of Financial Conduct Authority (FCA) regulations.

The regulation of BNPL under credit laws is a significant step in the process initiated by the federal government in November. The new laws will include fee caps, address missed payments, introduce warnings and disclosures, and enforce compliance with design and distribution obligations administered by the Australian Securities and Investments Commission. BNPL players must also have dispute-resolution mechanisms, offer hardship provisions, and adhere to stricter marketing rules.

The Financial Services Minister stated that BNPL is considered a credit product competing with other forms of credit, and thus it must meet the same set of standards as other credit products. The regulatory response in Australia is being closely observed internationally, as offshore regulators aim to enhance user protections. BNPL has gained popularity as an alternative to credit cards, with merchants bearing the product’s cost to boost sales. Afterpay and Zip pioneered this model, which global banks and technology companies such as PayPal and Apple have adopted.

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