However, the AFIA has warned that new entrants to the space such as Beforepay, chaired by former Westpac chief executive Brian Hartzer, and others who help with rent payments, for example, are not part of it. of the same category.
“Online payday loan is not BNPL. The AFIA urges consumers to seek out BNPL suppliers who are signatories to the BNPL Code of Practice. This will ensure they have access to higher consumer protections,” Ms Tate said.
No interest in “word games”
While the Federal Government has resisted calls from consumer groups to tighten regulation of buy now, pay later by including the sector in the credit law, Labor spokesman for financial services Stephen Jones said he had been “very upfront” with the industry about whether buy now, pay later was a credit product.
“We’re not interested in pun arguments about which parts of the industry are credited and which are not,” Jones said.
“If it looks like a duck, it smells like a duck, it’s a duck.”
Mr Jones said a Labor government would not rush to impose new regulations on the sector, but would act if it saw any shortcomings in the way the code was working.
“We will see how the code of practice works for a while. If there are gaps that need to be addressed, we will complete and legislate the code,” he said.
He identified consumer protection issues and code coverage as two areas where there were “probably gaps.” But he did not say whether that meant extending the code to cover payday loans and rental assistance, which are unregulated.
It is not appropriate to apply the same processes designed for a client seeking a home loan to other financing products.
— Diane Tate, CEO of the Australian Financial Industry Association
The AFIA, which regulates the voluntary code, said it already had eight of the biggest buy now, pay later registered players, covering 95% of the industry.
Afterpay, Brighte, Humm, Klarna, LatitudePay, OpenPay, Payright and Zip are signed up to the code, which includes scalable credit checks.
“In the not too distant future, the AFIA expects more code signatories, from BNPL suppliers in Australia and overseas suppliers, to enter our market,” Ms Tate said.
Zip chief operating officer Pete Gray agreed that payday loan products aren’t buy now, pay later and risk damaging the reputation of the industry.
“Brian Hartzer-style Beforepay products are not BNPL products, they leverage conditions to leverage industry-created goodwill,” he said.
The AFIA also warned against buying now, paying later under credit law, a process it said could create unintended bad outcomes for consumers.
“It’s not appropriate to apply the same processes designed for a customer wanting a home loan to other financial products,” Ms Tate said.
“Some of the processes designed for traditional credit products can harm consumers. For example, the requirement to complete credit bureau checks for every purchase through BNPL would ultimately impact customers’ ability to access finance, directly or easily, in the future. This would be a bad outcome for customers.
Mr. Gray said Zip was already doing credit checks, but these needed to be scaled up appropriately.
“There have been discussions that all credit should be regulated by the consumer credit code. It’s a very prescriptive law that suits mortgages or high credit limits where there’s potential harm if they’re wrong,” he said.
CHOICE chief executive Alan Kirkland said Britain was considering how to change the Credit Act to avoid such consequences, and there was no reason Australia could not make same.
“In reality, BNPL is very similar to credit cards in terms of approved limits. We want to see a level playing field,” he said.
However, Zip’s Mr Gray said consumer groups had failed to provide evidence that consumers were being harmed by the buy now, pay later sector.
“This is not true. Consumers are given very small amounts of credit that fund a purchase and are paid back very quickly under a BNPL model. There is no concept of a debt trap,” did he declare.