Advocates and industry agree: Time to close lending loopholes on buy now, pay later

Logo - Closing Lending Loopholes

Key stakeholders call for buy now, pay later should be regulated as meantime credit

In submissions released publicly by the Treasury today, major banks, industry associations, regulators and consumer advocates are unified in calling for an end to lending loopholes allowing buy now, pay later providers to avoid safe lending laws. 

Groups who made submissions calling for the appropriate regulation of buy now, pay later loans under the National Consumer Credit Protection Act include:

  • ANZ
  • Westpac
  • Customer Owned Banking Association
  • Australian Retail Credit Association
  • Mortgage and Finance Association of Australia. 
  • Australian Securities and Investment Commission
  • CPA Australia
  • National Legal Aid
  • More than 22 consumer groups, community legal centres and financial counselling bodies

The proposed reforms will require companies such as Afterpay, Zip and Humm to comply with common-sense and well-established consumer protections, in line with other credit products such as credit cards and personal loans. 

Financial Counselling Australia CEO, Fiona Guthrie

“We’ll only get one chance to get the regulation of BNPL right. And this is it. As the Banking Royal Commission showed in spades, loopholes in the law are disasters. BNPL is credit. It should be regulated like all other credit products.”

CHOICE CEO, Alan Kirkland

“With some buy now, pay later providers lending up to $30,000, it’s unfair and unsafe to allow them to avoid safe lending laws. They need to operate on a level playing field with credit cards and personal loans. As cost of living pressures rise, it is even more important that people are protected from rogue lenders.”

Financial Rights Legal Centre CEO, Karen Cox

“A broad sweep of stakeholders agree that BNPL needs to be fully regulated as credit.  The Government must act to close this regulatory loophole now and make sure the same guardrails apply to BNPL as apply to other types of personal credit.”

Consumer Action Law Centre CEO, Stephanie Tonkin

“The cost-of-living crisis means people are falling into debt traps faster than ever, and having easy access to multiple BNPL products just adds to the pressure and financial distress we hear about on our helplines every day. Unsolicited credit increases are already banned for credit cards, so we are calling for a level playing field, treating all consumer credit products like BNPL the same. People need real safeguards and consistency.”

Editor’s notes: 

In May 2022, more than 120 community groups signed an open letter calling on the new Government to regulate BNPL as conventional credit, with the same safe lending rules as other comparable forms of credit, following the groups’ experience of mounting cases of financial hardship fueled by BNPL.

In July 2022, consumer groups welcomed the new Government’s commitment to consult on how to best regulate BNPL.

In December 2022, advocates published their submission supporting Option 3 outlined by Treasury, with additional consumer protections including prohibiting buy now pay later debt being paid from a credit card. The submission includes dozens of stories on consumer harm.