If you are unfamiliar with Afterpay, the popular application allows users to buy items interest free in 4 instalments. Initially it was used to buy standard items including retail such as clothing and technology products,  but through its increase of popularity it is now able to be used to pay for groceries, medical bills and vet bills. 

The government has decided to change the law to classify BNPL products as credit products and increase tougher regulations on those products, in combination of this the government has considered three options 

  1. Strengthing current self-regulated industry code and adding an ‘affordability test’ to ensure Australians are able to pay up front for necessary bills.
  2. Limiting regulation under the Credit act.
  3. Regulating the credit industry which means enforcing the same laws as credit card providers. 

Ultimately, the government decided option two which means BNPL services will be considered credit products which means complying with the responsible lending obligation, and holding Australian credit licenses. 

The government argues the reason for this change is following a report in 2020 by ASIC, they found that consumers were suffering harm as a result of BNPL schemes. 

So what can BNPL customers expect? The changes will include suitability and affordability checks meaning you will be assessed to see if BNPL is suitable for your needs, it also means BNPL will have to ask the government before  increasing spending limits. Essentially, from later this year on it will not be as easy to use applications such as Afterpay, Klarna etc.