Financial Counselling Australia and the Consumer Action Law Centre have shared Australia’s experience of weak consumer safeguards for Buy Now Pay Later (BNPL), as part of the UK Government’s consultation on regulation of the sector in that country.
The consultation by HM Treasury comes after the independent Woolard Review recommended that BNPL firms be regulated “as a matter of urgency”. The Review was commissioned by the UK’s Financial Conduct Authority, equivalent to the Australian Securities and Investment Commission (ASIC).
The BNPL industries in Australia and the UK currently make clever use of loopholes in existing credit laws to operate largely unregulated. The Australian Government has so far endorsed self-regulation for BNPL via a weak voluntary Code of Practice.
Fiona Guthrie, CEO of Financial Counselling Australia says BNPL debt is causing harm and much stronger safeguards are needed:
Financial counsellors are seeing increasing numbers of people experiencing hardship exacerbated by BNPL. People are too easily becoming overcommitted and struggling to make repayments. Our recent survey found that 12 months ago 31% of financial counsellors said that half, more or all of their clients had BNPL debts. This figure is now at 84%.
While it may escape legal definitions, BNPL is credit. The relationship between BNPL and growing financial hardship is clear.
Tom Abourizk, Policy Officer at Consumer Action Legal Centre, says Australia’s self-regulation of the BNPL industry through a voluntary industry code is woefully inadequate:
An appropriate regulatory response is needed that ensures at the least that BNPL providers are required to assess whether a person can afford to repay BNPL debt.
We urge the United Kingdom government to learn lessons from Australia’s experience and take steps to ensure these products have better safeguards, in a manner that puts consumers, particularly people experiencing vulnerability, first.
Both groups say it’s important the Australian Government follow the lead of the UK and initiate an independent review to examine the harm of BNPL and identify proportionate safeguards.
- The UK Treasury’s consultation sought views from industry, community and consumer groups on the creation of a proportionate approach to the regulation of Buy-Now Pay-Later (BNPL) products. You can find FCA & CALC’s joint submission here
- Australia’s BNPL industry is self-regulated by a Code of Practice, overseen by the industry’s peak body the Australia Finance Industry Association (AFIA). The Code came into effect on 1 March 2021. Only eight of the 16+ BNPL providers have signed onto the Code.
- Financial Counselling Australia conducted its survey between August and September 2021. The full report can be found here.
James Hunt –Financial Counselling Australia
0452 304 193
Mark Pearce- Consumer Action Law Centre
0413 299 567