Australia’s new Buy Now Pay Later Code of Practice fails in its aim of raising industry standards in a number of ways, according to a review of the code.
Law firm The Fold Legal has run the rule over the new code, which was launched by the Australian Finance Industry Association earlier this month, assessing it against AFIA’s claim that it takes industry practice beyond legal and regulatory requirements.
The Fold Legal commends AFIA for requiring code-compliant members to join the external dispute resolution body, the Australian Financial Complaints Authority, which is not a requirement under law.
It says one of the code’s other strengths is that it requires members to consider customer vulnerability before providing services. There is no specific regulatory requirement to consider vulnerability.
It also commends the inclusion of a credit suitability framework, saying: “While the code provision falls short of the responsible lending criteria in place for credit providers, it is a step in the right direction and seems to strike a reasonable balance between consumer protection and efficient business practice.”
On the negative side, The Fold Legal says there are a number of areas where the code falls short.
The BNPL industry will be subject to the design and distribution obligations, which will be administered by ASIC from October, but the product design and disclosure standards in the code will not meet the DDO requirements.
Another thing the code doesn’t address is educating consumer on the impact BNPL products may have on their credit rating.
“While many BNPL customers may not currently hold other credit products, future applications for credit cards and home loans may be impacted if they have had issues repaying any BNPL products.” The Fold Legal says.
The code has some requirement for merchants and retail partners but The Fold Legal says these obligations would already need to be managed by merchants in order to comply with their obligations relating to unfair contracts and misleading and deceptive conduct.