Australia’s ballooning buy now, pay later system is set to be regulated by the federal government, over fears it poses a growing danger to consumers.
Under changes to be announced by Financial Services Minister Stephen Jones in a speech on Monday, buy now, pay later will soon be treated as a credit product.
After a consultation process, the federal government has decided that providers will need a credit licence, have hardship requirements and minimum standards of conduct to better product the millions of Australians now using the products.
With seven million active accounts in the 2021-22 financial year, totalling more than $16bn in transactions – 37 per cent more than the previous year, Mr Jones said tougher regulation was needed.
He said it “looks like credit, it acts like credit, it carries the risk of credit”.
Treasurer Jim Chalmers said buy now, pay later had a role to play in the economy, but it had become too popular without any checks and balances.
“They’ve got a role to play, but we need to make sure that we do manage the risks,” he told ABC News.
“And the best way to do that is to legislate – to regulate it as a credit product so that we can manage some of the risks around hardship and marketing.
“We think that they do have a legitimate role to play in the system. They are very popular, but we need to make sure that we manage them appropriately because the harsher impacts of these fall disproportionately on some elements of our society, and we don’t want that.”
Women, First Nations communities and people on low income are disproportionately affected by the ill effects of buy now, pay later; notably the ability to operate multiple accounts simultaneously.
Dr Chalmers said there would be more consultation to come.
“But if you make it a regulated credit product under the Credit Act, we can better manage some of the risks that people are aware of and here’ll be appropriate transition arrangements,” he said.
“We want people who can afford to participate in buy now, pay later to be able to access it, but there needs to be the right rules and regulations around it.”