The Assistant Treasurer and Minister for Financial Services has announced that the government will change the law, so that buy now, pay later products are regulated as credit products.
The government will implement option 2 in its consultation paper, under which buy now, pay later providers will be required to:
- hold Australian Credit Licences;
- comply with Responsible Lending Obligations;
- meet statutory dispute resolution and hardship requirements;
- comply with statutory product disclosure and other information obligations;
- abide by existing restrictions on unacceptable marketing; and
- meet a range of other minimum standards in relation to their conduct, and in relation to their products.
Industry will be consulted on the detail.
The Assistant Treasurer referred to the need for consumer protection as well as competitive neutrality.
ASIC review
Separately ASIC has announced it made an interim stop order on 25 May 2023 preventing Humm BNPL Pty Ltd (Humm) from issuing its buy now pay later (BNPL) product because of deficiencies in its target market determination (TMD). The order was revoked by ASIC on 26 May 2023 following immediate corrective action by Humm to address the design and distribution obligation (DDO) deficiencies identified by ASIC.
As part of ASIC’s ongoing monitoring of compliance with design and distribution obligations (DDO), ASIC has been reviewing the product governance arrangements of a group of BNPL providers. The review analysed how TMDs were developed, as well as the data and metrics that informed review triggers. Providers were selected based on their market share, key attributes of their BNPL offering, and amount of credit offered.
ASIC identified four areas for improvement:
- Product descriptions
- Defining target markets
- Setting review periods
- Setting review triggers.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
