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Kate Emery: It’s about damn time Buy Now Pay Later industry is regulated in Australia

Jun 07, 2023

What do Financial Services Minister Stephen Jones and popstar Lizzo have in common?

Almost nothing, unless the minister is keeping his dance moves under wraps. But when the former announced new regulations for the buy now pay later sector, it was the latter's 2022 banger that came to mind: About Damn Time.

How has it taken years to acknowledge that lending someone money to buy what they can't afford is credit and not a thing that only looks, swims and quacks like credit?

Why have we been so blasé about allowing financially vulnerable people to rack up debt without checking if they have a hope of paying it off before the West Coast Eagles are back in the top eight?

How has it been so easy to turn a blind eye to people like Alex, a First Nations West Aussie who lives remotely, earns $60,000 and has so little money after bills that, until recently, he used BNPL for daily expenses? Alex incurred $20-$50 in late fees every fortnight while waiting for payday to make repayments. . . and for the cycle to start again. That's $520-$1300 a year.

Jordan Murray

If you’re not familiar with BNPL you’re probably old enough to remember when computer printers sounded like space shuttle launches and layby was the way to buy what you can't yet afford.

BNPL allows people to buy upfront and interest-free, without paying. Repay it in time and there are no fees.

If you think that sounds a bit like a credit card, or possibly three credit cards standing on each other's shoulders in a long trench-coat, Mr Jones sort of agrees. This week he announced BNPL will be (mostly) regulated under existing credit laws, having previously been exempt.

This matters because those most likely to get themselves in trouble with BNPL-induced debt aren't impulsive teens with a Shein addiction but First Nations people, who have comparatively poor financial literacy thanks in part to Australia's dodgy history of not paying them wages; people on low incomes; and women. That includes women at risk of financial abuse like Nikki, whose ex-partner racked up tens of thousands of dollars in debt, including multiple BNPL accounts, leaving her struggling with repayments for money she’d never seen.

It is also a warning for Government to act sooner the next time a shiny new tech product comes along.

The changes mean companies like Afterpay, Zip, Humm and Klarna will have more responsibility to lend to those who can afford it.

The aim is to protect people like Maria, who lives with mental illness, is dependent on the disability support pension and has a tendency to buy things she can't afford during mental health episodes. She accrued more than $4000 in debt across multiple BNPL providers.

BNPL won't be treated exactly like a credit card, with obligations scalable for risk.

It represents the middle ground of three options floated by the Government last year, so not everyone thinks it goes far enough. But Australia's regulatory action on BNPL is probably a bit ahead of the curve globally so we can add this to the list of Things Australia Can Be Proud Of, right under Kylie Minogue and gun control.

It is a compromise that adds needed protection for users, while giving BNPL providers minimal room to cry over-regulation. (Particularly not crying? The Aussie founders of Afterpay who sold out for $39b before the rules changed in the best case of good timing since Steven Bradbury laced up his skates).

Kate Emery

Kate Emery

It is also a warning for Government to act sooner the next time a shiny new tech product comes along.

Faster action might have helped people like Joe, who was already in financial hardship and struggling with health issues when he took on a $250 BNPL debt. Unable to make repayments at first, Joe was hit with fees of $101 a month, so even once he’d finally paid off the principal he was left with a $1244 debt.

The real kudos for this week's decision goes to the consumer advocates and community organisations who have spent years warning about the damage unregulated BNPL lending is doing to society's most vulnerable — and helping them. They include the Salvation Army, Good Shepherd, Kimberley Community Legal Services and UnitingCare Australia, from whose Government submissions I have taken the stories in this column.

Unfortunately their chance of pocketing a cheque for $39b is as about likely as Mr Jones winning a Grammy.

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