The Australian Finance Industry Association,which represents buy now,pay later (BNPL) operators,has released interim guidelines to protect customers ahead of the federal government’s intended regulation of the popular short-term loans.
The Australian Finance Industry Association has released interim guidelines to protect customers ahead of the federal government’s intended regulation of the popular short-term loans.Louie Douvis
The changes have been that said the new code should encourage BNPL firms,such as AfterPay and ZipPay,to be more proactive in dealing with financial hardship,and it should “introduce specific and clear commitments to assist people experiencing vulnerabilities”.
The interim guideline requires operators to promote the use of new digital tools to identify suspicious activity;increase their communication with customers;improve training programs for staff to identify and support vulnerable customers;and better promote their complaints processes.
“During the Christmas period,the pressure on finances can increase,adding to the cost of living pressures impacting many Australians,” Australian Finance Industry Association chief Diane Tate said.
“More than 6.3 million Australians now use BNPL products because it helps them budget,they don’t get charged interest and it is an easy-to-use digital technology. In an environment where cost of living pressures are increasing on many consumers,it is important they have access to the right product that meets their needs.”
Earlier this year,the association released an independent review of the industry’s code of practice that made 51 recommendations,with several of those focused on BNPL firms’ dealings with vulnerable customers,after consumer groups said the products were commonly used by people who could be disadvantaged,including those on low incomes.
The review,by consultancy Promontory,however,did not deal with the highly contested issue of whether customers should be subject to thorough affordability checks.
BNPL products are short-term instalment loans that compete with credit cards,but because they are not technically credit under the law,they can be approved without a credit check. The federal government said there were about 7 million active accounts in Australia,with the average consumer using it for 18 transactions a year with an average transaction amount of $136.
“The industry is asking for customers who are feeling financially stressed or experiencing a change in their personal circumstances to let the BNPL provider know,” Tate said.
“We really encourage people to speak up. And we are making sure the industry is doing as much as they can,whether they see a change in payment patterns,to identify what’s going on and what support they can provide.”
New laws to regulate BNPL providers have been delayed,but Financial Services Minister Stephen Jones last month told theAustralian Financial Review the government still intended to bring the industry under credit laws and introduce proportionate responsible lending obligations as part of a crackdown on the sector.
Under the changes,BNPL operators will have to comply with the National Consumer Credit Protection Act and hold an Australian credit licence.
The new laws will also require providers to have processes to handle dispute resolution and hardship claims. The new laws will also seek to stamp out unacceptable marketing by the groups and require groups to show their products are suitable for their users.
The industry has been under intense scrutiny,especially as the cost of living crisis bites. The NSW Advocate for Children and Young People this month noted the widespread use of BNPL products by youth for healthcare.
Last month,the which showed 40 per cent of Australians aged 18 to 39 had used a BNPL service in the past year,compared with 10 per cent of people aged 65 and over.
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