Buy Now, Pay Later Schemes To Be Regulated Under Credit Act
The buy now, pay later industry will be regulated under the Credit Act by the federal government to better protect its users.
In a speech to be delivered by Financial Services Minister Stephen Jones on Monday, it will detail buy now, pay later services will be treated as a credit product, with providers required to have a credit licence and hardship requirements.
More checks will be required for new customers joining the already seven million people using the services such as Afterpay and Zip.
Buy now, pay later services allow customers to immediately make a purchase and pay it off over instalments but there are concerns its accessibility is causing financial stress on those who take on too much debt.
The majority of users are aged under 35, with the services not regulated the same way as credit cards, making it easier to obtain and use.
There are also concerns some holders obtain multiple accounts, sending them into a spiral of debt.
The stricter regulations come after a Treasury paper released in November 2022 investigated possible ways to regulate the industry.
Choosing to regulate the services the same as credit cards, the changes will require providers to meet modified Responsible Lending Obligations under the Credit Act.
The paper found that almost $16 billion in tractions were made in the 2021/22 financial year – up by 37 per cent from the financial year prior.
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