ASIC Will Likely Issue A Standalone Guidance On Low-Cost Credit Contracts Including BNPL

The Australian financial regulator, the Australian Securities and Investments Commission (ASIC) recently saw its Commissioner Kate O’Rourke confirm that the agency will likely issue a standalone guide regarding low-cost credit contracts which include Buy Now, Pay Later (BNPL). 

ASIC Wants To Further Regulate BNPL

According to O’Rourke, the regulator’s focus will be on addressing modified responsible lending obligation, as well as any other obligations that need to be reconsidered. However, the guidance will also depend on additional considerations, since the regulator intends to consult stakeholders before the document is finalized.

Furthermore, Australian lawmakers have also presented a draft legislation before the Parliament, seeking to bring BNPL under the existing National Credit Act. 

BNPL has spread around the world as a popular way for consumers to purchase items without having to pay the full price at the moment of purchase. Instead, they get to access small credits when paying for goods and services, although this has mostly been the case with online purchases.

The so-called micro-credits are typically interest-free, but they do incur heavy interest if the user fails to make a payment on time. Even with this risk, BNPL has exploded around the world in recent years, with Australia included. 

The global sector expects it to grow at a rate of 20.7% between 2021 and 2028. On top of that, the worldwide transaction volume on BNPL platforms is expected to skyrocket to $680 billion by next year, while the US alone is expected to contribute around $100 billion.

BNPL Is Blowing Up Around The World

BNPL is an emerging, extremely lucrative space that even giants such as Visa and Apple have engaged in. Both firms now offer BNPL services in different forms, while the industry’s early mover, Klarna, has grown enough to consider going public.

With that being the case, the regulators have taken an interest in the sector as well, with the UK’s FCA recently welcoming the government’s consultation on regulating the currently exempted BNPL products. Even in the US, the Consumer Financial Protection Bureau (CFPB) recently made headlines by issuing guidelines for BNPL providers.

Now, ASIC intends to address the matter for its own jurisdiction, with Commissioner O’Rourke stating that the regulator is also concerned about the rampant financial scams. She explained that there is significant variability in the maturity of scam strategies and governance. Meanwhile, attempts to determine liability have been inconsistent, and the approaches too narrow, resulting in the lack of support for the scam victims.