Treasury has released a further exposure draft of the National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025 to implement the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024.

ASIC has also issued information on licensing of buy now pay later providers.

The Act established a regulatory framework for low cost credit contracts (LCCC), which may include buy now pay later (BNPL) contracts.

Regulations
The Regulations prescribe:

• inquiries that must be made about a consumer’s financial situation;
• requirements for a LCCC licensee’s unsuitability assessment policy, including the content of the policy and conducting reviews of and updating the policy;
• the maximum level of fees or charges a LCCC licensee can charge on a consumer in a 12-month period for the credit contract to be considered a LCCC;
• the information that must be included in a first default in payment notice for LCCCs;
  and
• medical financing at no cost to the consumer is not a BNPL arrangement.

Cap on fees

It is intended that the first fee period will commence on 11 June 2025.

The first fee period will last 12 months, at which point the subsequent fee periods begin.

Each subsequent fee period also lasts for 12 months. The fee periods do not reset.

The regulations set caps for the two kinds of fees or charges that can be levied on a debtor by a credit provider. The first kind of fees or charges is fees or charges other than default fees or charges (other fees). The second kind of fees or charges is default fees or charges (default fees).

The effect of the caps is that there is no circumstance in which a consumer can be levied
more than $320 in the first fee period (including a maximum of $200 for other fees) and $245 in a subsequent fee period (including a maximum of $125 for other fees) by a credit
provider in relation to all the LCCCs between them and the consumer in the fee period.

Licensing
ASIC has published Information Sheet 285 Buy now pay later credit contracts: Credit licensing (INFO 285) on how to apply for a credit licence.

From 10 June 2025, providers of buy now pay later contracts will need to hold a credit licence that authorises them to engage in credit activities as a credit provider, subject to transitional arrangements.

Providers who do not have their application accepted for lodgement by ASIC by 10 June 2025 may be engaging in unlicensed conduct if they continue to operate.

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