Huge changes coming to buy now, pay later services including AfterPay – here’s what it means for Australians who use them
- Australian shoppers could have to do financial checks to use buy now, pay later
- Department of Treasury intended to overhaul system and tighten regulations
- Concerns raised too many Australians going into debt they cannot afford
Australian shoppers could soon be forced to go through financial checks before they can use buy now, pay later services.
The Department of Treasury intends to overhaul the multi-billion dollar industry and bring in stricter regulations for services like Afterpay and Zippay.
It comes amid concerns providers have minimal credit checks and are allowing consumers to use their services even though they can’t afford to pay off the debt.
Australian shoppers could soon be forced to go through financial checks before they are allowed to use buy now, pay later services (stock image)
The Department of Treasury intends to overhaul the multi-billion dollar industry and bring in tougher regulations for services like Afterpay and Zippay
The Australian Securities and Investment Commission surveyed customers finding 19 per cent had made cutbacks on essentials to make their repayments.
Financial Service Minister Stephen Jones warned Australians were becoming buried under too much debt.
‘The number that surprised me, there’s only seven million ‘buy now, pay later’ accounts in Australia – most of them for people between the ages of 20 and 35,’ he said.
‘The thing is though, a lot of people have got not one, not two, but three or four accounts.
‘It appears that there is a small percentage of the market where people are getting into hot water.’
Mr Jones released a discussion paper on Monday offering three suggestions on how to regulate buy now, pay later services.
The Australian Securities and Investment Commission surveyed customers finding 19 per cent had made cutbacks on essentials to make their repayments (stock image)
One of the options is to tighten the industry code and introduce an ‘affordability test’.
The change would mean customers would need to undergo a financial check to determine whether or not they can afford to pay off the debt.
The industry code is currently self-regulated and is not enforceable as it is not considered law.
Buy now, pay later providers would not face any real penalties if they failed to comply with it.
A second option would be to regulate buy now, pay later providers under the Credit Act meaning they would need to apply for an Australian Credit Licence.
The third is to bring in limited regulation of providers under the Credit Act.
Mr Jones said the providers would need to respond to the discussion paper by December 23 (stock image)
‘This approach would require buy now pay later providers to obtain and maintain an ACL, plus introduce modified Responsible Lending Obligations (RLOs) under the Credit Act to determine unsuitability, combined with a strengthened Industry Code,’ the paper said.
Mr Jones said the providers would need to respond to the discussion paper by December 23.
‘We actually don’t want to stop access to appropriate levels of credit products, we just want to make sure that where it is being offered, it’s done in a safe way,’ he said.
Mr Jones said he hoped any changes to the industry would be brought in before the end of 2023.
‘The lack of appropriate regulation shouldn’t protect those operators,’ he said. ‘This has been a slow train coming.’