From June 10, BNPL products, including Afterpay, Zip and Humm, as well as low-cost credit contracts for big purchases like dental work, will be regulated the same way as credit cards.
The Albanese government introduced the new legislation back in June 2024. It requires BNPL providers to hold an Australian credit licence, comply with existing credit laws regulated by the Australian Securities and Investments Commission (ASIC) and establish a new category of low-cost credit under the Credit Act.
The changes mean that new customers signing up for BNPL services will now have to answer questions about their finances and have their credit files checked before they can borrow money.
This could mean new customers will be able to borrow less than existing BNPL customers.
The changes have been welcomed by consumer advocates, who have spent years campaigning for tighter regulations.
Michael Saadat, international head of public policy at US giant Block, who owns Afterpay, has told The Sydney Morning Herald (SMH) that new customers will have to answer a few questions about their financial situation, including if they have outstanding debts.
Saadat said that the process of determining customer limits would be “virtually instantaneously.”
“Everybody who wants to have a BNPL account in Australia has probably already got one. It’s like closing the stable door after the horse has bolted,” Sadaat told SMH.
“If a customer has a really good credit score and the information they’ve provided in response to those questions means we’re comfortable that we can give them a higher spending limit initially, then we will do that.
“But equally, if a customer has a lower credit score and there’s an indication that we should be giving them a lower spending limit, then we will. In some cases, we might decline a customer altogether,” Saadat said.
Existing Afterpay customers who want to raise their spending limit will have their credit checked.
Afterpay is also not required to verify a customer’s declared income.
Zip has also said that its Zip Pay product will be regulated, while three other products it provides are already regulated.
“Zip welcomes the new buy now, pay later legislation in Australia and the introduction of these standards, which are aligned with Zip’s existing practices,” a Zip spokesperson told SMH.
