Minister for Financial Services Stephen Jones has taken the middle path in choosing option 2 – light-touch regulation – as the way to regulate the buy now pay later industry.
But, as many of the submissions to the government consultation on the issue pointed out, the government has not spelled out the specific ways in which option 2 will differ from option 3 – full regulation under the Credit Act.
Option 1 – self-regulation – was never going to get up.
Jones said that under the government’s plan, BNPL providers will have to hold Australian credit licences, comply with responsible lending obligations, meet dispute resolution and hardship requirements, and comply with product disclosure and other information obligations.
He said the plan would bring BNPL into line with other regulated credit providers but simplify some requirements and address concerns about competitive neutrality. Responsible lending obligations on BNPL providers will be “scalable and technologically neutral,” Jones said.
What is involved in that simplification and scalability is unknown.
As the Australian Banking Association pointed out in its submission: “The current responsible lending obligation arrangements are already intended to be scalable, based on the risk of consumer harm and the kind of credit product sought, among other factors.”
The Customer Owned Banking Association said it was concerned that if simplified responsible lending obligations resulted in watered down requirements, “it could create a knock-on effect for responsible lenders in the broader credit ecosystem”.
A number of submissions called for BNPL providers to be included in the mandatory comprehensive credit reporting regime, so that other lenders can see what BNPL obligations consumers have when they apply for other credit.
Submissions also called for a ban on BNPL limit increase offers and for removal of the ability of BNPL providers to apply a no-surcharge rule to merchants.
Jones is yet to address any of these specifics, which makes yesterday’s announcement a bit of an anti-climax.
Interestingly, the Minister ignored the recommendation of the regulator that will be given oversight of BNPL. ASIC recommended option 3, full regulation, saying: “Credit products with similar characteristics and the same purpose and function should be treated the same way in the regulatory framework.
“The harms identified in ASIC’s work on BNPL arrangements suggest the starting point for consumer protections should be the same as credit products with comparable harms.”