Buy Now Pay Later Reforms

Background

BNPL transactions continue to grow strongly. 

According to Reserve Bank of Australia data, the value of BNPL transactions increased by around 13 per cent in 2022-23, compared with 37 per cent in 2021-22.[1] The value of BNPL transactions during the 2022-23 financial year was around $19 billion, equivalent to approximately 2 per cent of all Australian card purchases.[2] 

BNPL products bring a range of benefits to both consumers and the economy, such as improved access to credit and increased business for merchants through improved consumer purchasing power. They also increase competition among credit providers, reducing the cost of some products and generating innovation in product design. However, arising from this growth has been a range of concerns. These include unaffordable lending practices, unsatisfactory complaint resolution and hardship assistance, and excessive late payment fees.[3]

The aim of the Buy Now Pay Later reforms (effective as of 10 June 2025) is to protect consumers in a way that is flexible, adaptable, and proportionate to the risk of consumer harm.

Understanding the Reforms 

Previously, BNPL arrangements were not regulated under the National Credit Act because they typically fell under certain exemptions available under the National Credit Code. BNPL arrangements were not subject to responsible lending obligations or other National Credit Act requirements, such as the requirement to hold an Australian Credit Licence (ACL).

The amending act amends this to include a new category of regulated credit, known as “low-cost credit contracts “. This means that BNPL contracts will be class of credits that will be regulated as at 10 June 2025, the following reforms took effect 

• All providers of Buy Now Pay Later products, including low-cost credit contracts, must comply with the National Credit Act, National Credit Code, and responsible lending obligations. They must also consider financial hardship requests and credit reporting.

• Mandatory obligations for providers will include holding an Australian Credit Licence, becoming a member of AFCA if not already, and establishing appropriate processes and mechanisms for addressing consumer complaints.
• BNPL providers must be AFCA members, hold an Australian Credit License and meet mandatory obligations. 

 The transitional arrangements allow a BNPL provider to continue to provide BNPL products where by 10 June 2025:

• they have applied for and had their application accepted by ASIC for the appropriate ACL or variation of their ACL (that is, the application has been lodged with ASIC in the approved form for ASIC to consider but ASIC has not yet granted or rejected the application); and
• they have become members of AFCA.[4] 

[1] See Reserve Bank of Australia, Payment System Board Annual Report - 2023

[2] As Above

[3] Explanatory Memorandum, Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 50.

[4] See Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 section 8.