Crackdown on buy now, pay later amid abuse claims
The federal government will move to regulate buy now, pay later services in an attempt to protect Australians against financial abuse and hardship.
Buy now, pay later services will soon be treated as credit providers and will need to follow more stringent lending practices in an attempt to better protect Aussie borrowers.
Financial Services Minister Stephen Jones says providers will need a credit licence in line with other lending services and adhere to minimum standards and hardship requirements following the changes.
They will also have to abide by certain marketing restrictions.
Mr Jones said people were able to open numerous accounts and get into large debts far more easily with buy now, pay later (BNPL) services than they would with credit cards.
He used a speech at a responsible lending and borrowing summit on Monday to outline the changes.
"The plan will protect people from the spirals of harm that unregulated, unrestricted lending can cause," Mr Jones said.
"We have had to find a balance and we think we've done it."
The services, which include providers such as Afterpay, Zip and Klarna, have created an extra $2.7 billion in revenue for Australian businesses by bringing in new customers and allowing shoppers to spend more.
"But with those opportunities have come new and growing dangers to consumers, which up until now have been largely unregulated and unchecked," the minister said.
Mr Jones said the risks disproportionately affected women, Indigenous people and those on low incomes.
"We have also heard that some people may be weaponising BNPL products in abusive relationships," he said.
"Doing things like coercing their partners to take on BNPL debts or taking out BNPL debts in their partner's name without their knowledge.
"Other concerns raised by stakeholders included excessive fees, poor disclosure practices, problematic marketing practices, and unsolicited credit increases."
There are seven million active accounts in Australia, with the average customer using their accounts for 18 transactions a year. The average transaction is $136.
In 2022, the financial watchdog ASIC found one in five users showed two or more indicators of financial stress.
Mr Jones said ASIC's powers would be boosted to enforce the new regulation and draft legislation would be put out later this year for consultation to ensure a balanced approach was struck.