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In brief

On 21 November 2022, the Treasury put out a call for submissions to assist with developing the Federal Government’s regulatory framework for buy now, pay later (BNPL) arrangements. The released options paper seeks to address the purported lack of oversight of the BNPL industry which has so far not been regulated in the same way as other forms of consumer credit under the National Consumer Credit Protection Act 2009 (Credit Act). Pending stakeholder review, the paper seeks to strengthen the regulatory framework surrounding BNPL products and depending on the option adopted, may see them subject to the same regulations as credit cards or loan facilities.

The government has made clear that it wants the regulation surrounding BNPL products to be strengthened, due to both provider and consumer-sided issues. The options paper Regulating Buy Now, Pay Later in Australia sets out three alternatives for the future of BNPL regulation, each with differing degrees of control. Submissions to the paper close 23 December 2022.

What options are open for feedback?

The Treasury seeks feedback from stakeholders on three broad alternatives for the regulation of BNPL in Australia:

  1. Strengthening the BNPL Industry Code: Potentially the least prescriptive of the three options, this alternative proposes stronger self-regulation within the BNPL industry (including potential enforcement by ASIC) but will not impose the consumer credit licensing regime. However, it will also see amendment to the Credit Act to impose a scaled back affordability test.
  2. BNPL Credit Licence: Tailored licensing regime. A moderate approach to bring BNPL arrangements under the Credit Act while remaining distinct from other credit providers, strengthening industry codes. Express carve-out for merchants effectively distributing the product.
  3. Full Credit Licence: Amendments to the Credit Act to expressly regulate BNPL providers. They would then be subject to responsible lending obligations applicable to other credit card providers and need to meet other licence conditions including breach reporting and compensation requirements. It is also proposed that the industry code would continue to operate to address BNPL specific issues outside the scope of the Credit Act.

In more detail 

Australians are some of the most prolific consumers of BNPL services globally, with transactions increasing by 37% to AUD 16 billion in the 2021-22 financial year. BNPL products have been the subject of ongoing concern for the regulator and government since its inception, in particular as it was broadly accepted that they fell outside of the licensing framework of the Credit Act on the basis that no fees were charged, was short term credit or under the continuing credit exemption.

The primary concern for Treasury, as outlined in its options paper, is that BNPL products are not subject to the onerous requirements of the Credit Act, such as stricter reporting obligations and the requirement to hold an Australian Credit Licence. This lack of oversight not only means that BNPL providers are not held to the same standard as their credit card-provider peers, but also that consumers may be harmed by the lack of coverage being provided by key protective measures otherwise available.  A further issue to be addressed is that BNPL debts broadly fall outside the credit reporting regime. This means that providers are generally not required to make reports to Australian credit reporting bodies and are further limited in what information they can seek.

The government has been seeking stakeholder consultation surrounding BNPL regulation for some time, with Assistant Treasurer Stephen Jones stating that Australia had looked to other jurisdictions such as the United Kingdom for its approach to BNPL regulation.  Treasury has also engaged in consultation with industry bodies, regulators and consumer groups and expects to continue these discussions over coming months.

The Treasury’s options paper outlines three alternatives aiming to govern the future of BNPL regulation. It now seeks further consultation to determine the appropriateness of each option over the others and whether it meets the consumer protective measures and guiding principles the government is seeking to address.

Interested parties are asked to submit responses by 23 December 2022, with Treasury’s stated aim of passing legislation under one of the proposed regulatory frameworks by the end of 2023.


Yechiel is a Special Counsel in the Melbourne office. His primary focus is in the regulation of financial services and consumer credit. He has more than 12 years' experience in advising a broad range of clients, ranging from established financial institutions to fintechs, both local and offshore.


Bill Fuggle is a partner in the Sydney office of Baker McKenzie where he is a leading adviser in innovative listed investment products, fintech and neobanks, financial services regulatory advice, fund formation and capital markets.


Trudi is a Partner in Baker McKenzie's Financial Services & Funds team in Brisbane.

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