Buy now, pay later providers will not fall under the National Credit Act
(22 February 2019 – Australia) Afterpay and ZipCo have dodged regulation requiring them to conduct credit checks prior to signing up customers.
While the final report from a Senate committee recommended buy now, pay later providers should “appropriately consider consumers’ personal financial situations” before extending credit, the report stopped short of indorsing Afterpay and its competitors be covered by the National Credit Act, which would have required them to conduct responsible lending checks.
"Unlike other credit providers, these products are not covered by the National Consumer Credit Protection Act 2009 ... and providers have no obligation to undertake credit checks or appropriate measures to ensure their product is appropriate for the consumer's personal circumstances," the committee said.
"The committee considers that this regulatory gap should be filled."
The committee said there is a real risk for vulnerable Australians from adding buy now, pay later products to a mix of other credit products.
"The evidence by buy now, pay later providers ZipCo and Afterpay to this committee suggested that both were alive to these risks and willing to strengthen the regulatory framework that applies to the sector.
"There is no guarantee, however, that future entrants to the sector will take a similar approach.
"There is a clear role for regulators in ensuring that buy now, pay later is subject to proper regulation that will provide consumers with the same protections they would enjoy with respect to products with a similar risk profile."
This recommendation goes further than the corporate regulator, which said Afterpay and its rivals should be subject to its product intervention power, but they should not be subject to further regulation at this stage.
The committee also recommended Afterpay and its competitors develop an industry code of practice.
In recent years buy now, pay later services have become more popular particularly among Millennials who choose to use the service over traditional credit cards.
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