Buy now, pay later (BNPL) providers in Australia are being urged to apply for credit licenses as new regulations will come into effect in June.
In recent years, the popularity of BNPL products from companies such as Afterpay, Klarna, and Zip has surged, with approximately 40% of Australians using them in the first half of last year, according to a Finder survey. However, many of these products lack coverage under the National Consumer Credit Act. In response to this gap, the government moved last summer to amend the act, requiring providers to obtain a credit license and adhere to existing regulations regarding consumer checks.
The new legislation also introduced a category of ‘low-cost credit’ under the Act, designed to highlight the lower risk and cost of BNPL compared to other regulated forms of credit.
With the amendments now in place, the Australian Securities and Investment Commission (ASIC) has instructed BNPL firms to take necessary steps to comply. By June 10, firms must apply for a credit license, ensure their application is accepted by ASIC, and become members of the Australian Financial Complaints Authority.
ASIC is advising providers to submit their applications early—preferably by May 11—due to the potential time required to gather additional information.