Following on from the Senate Hearings in January 2019, the Economic References Committee (Committee) published its Report on credit and financial services targeted at Australians at risk of financial hardship.
In addressing the current regulation of the buy now pay later (BNPL) industry, the Committee raised its concerns about the ease of accessibility of BNPL services to consumers experiencing financial hardship. Despite BNPL businesses, such as AfterPay and Zip.co stating that they already had algorithms in place to detect whether it was appropriate to provide services to an individual, the Committee stated that “clearly more needs to be done to ensure consumers are protected, and company algorithms alone are not sufficient.”
The Committee made three key recommendations to Government in connection with the future regulation of the BNPL industry. Broadly, these were:
- the establishment of a regulatory framework in consultation with ASIC which would require, among other things, BNPL businesses to:
- A. assess a consumer’s personal financial situation before credit is extended;
- offer consumers access to internal and external dispute resolution schemes; and
- ensure that products are affordable and offer value for money;
- BNPL industry develops an industry code of practice; and
- ASIC’s product intervention powers are expanded to cover BNPL products.
A key theme to each of the recommendations is a proposed expansion of ASIC’s remit to deal and intervene in the BNPL industry. In responding to these recommendations, AfterPay announced its support of each measure while also emphasising its intention to “find ways to collaboratively utilise technology and share information to ensure that a small segment of the population are prohibited from using services that are not suitable for them”. To this end, AfterPay restated that “open banking presents an opportunity for Afterpay and the wider industry.”