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Rattle the MarketBuy Now Pay Later services in Australia are set to undergo significant changes starting June 10, impacting millions of Australians who utilize services like Afterpay, Zip, and Humm. These changes come as part of tighter regulations aimed at ensuring consumer protection and preventing harmful credit practices. The new legislation, introduced by the Albanese government in June 2024, mandates that BNPL providers hold an Australian credit license, adhere to existing credit laws overseen by the Australian Securities and Investments Commission (ASIC), and establish a new category of low-cost credit under the Credit Act.
Under the new regulations, BNPL products will be subject to the same level of scrutiny as credit cards, with providers potentially required to conduct mandatory financial checks and inquiries into consumers’ income and expenditure to mitigate financial risks. This move signifies a shift towards greater accountability and transparency within the BNPL industry, aligning it more closely with traditional credit products like credit cards and home loans.
According to CreditSmart, BNPL products rank as the third most popular form of credit in Australia, following credit cards and home loans. As a result of the regulatory changes, consumers can anticipate the inclusion of missed or late repayments on their credit reports, along with mandatory credit checks that could impact their credit scores. This shift is expected to particularly affect younger Australians, who constitute a significant portion of BNPL users, with Millennials and Gen Z making up a substantial percentage of consumers.
Elsa Markula, the CEO of Arca, emphasized the importance of consumers understanding the implications of these changes on their credit profiles, especially in relation to future borrowing endeavors such as applying for loans or mortgages. Markula highlighted that responsible BNPL usage could now serve as a means to bolster one’s creditworthiness, particularly for individuals seeking access to traditional credit avenues in the future.
As the regulatory landscape evolves, consumers are advised to stay informed about their BNPL provider’s reporting practices and to make timely repayments to safeguard their credit scores. Markula stressed the significance of monitoring credit reports regularly for errors or omissions, as well as limiting unnecessary credit applications to avoid signaling financial distress to potential lenders.
These changes underscore the need for Australians to exercise prudence when utilizing BNPL services and to adopt responsible borrowing habits to maintain healthy credit profiles. By adhering to the revised regulations and staying proactive in managing their finances, consumers can navigate the evolving credit landscape more effectively and make informed decisions regarding their credit usage.
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