Buy Now Pay Later reforms have commenced: what does this mean for you?

Buy Now Pay Later (BNPL) providers are now regulated under the National Consumer Credit Protection Act 2009 (National Credit Act).[1]   So, what do these reforms mean for the BNPL industry?

What has changed?

Previously, BNPL arrangements were not regulated under the National Credit Act because they typically fell under certain exemptions available under the National Credit Code (NCC). BNPL arrangements were not subject to responsible lending obligations (RLOs) or other National Credit Act requirements, such as the requirement to hold an Australian Credit Licence (ACL).

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Amending Act) was passed on 10 December 2024, and extended the operation of the NCC to the provision of credit under a BNPL contracts.

The Amending Act includes transitional arrangements for existing BNPL providers. From 10 June 2025, existing BNPL providers must hold an ACL (or have applied for an ACL prior to this date) that authorises them to engage in credit activities as a credit provider, among other things.

If you do not currently hold an ACL (or did not apply for an ACL before 10 June 2025), then you are not permitted to provide BNPL contracts until you obtain an ACL that authorises you to engage in credit activities as a credit provider.

What is a BNPL contract?

The reforms apply to BNPL contracts that are part of a ‘BNPL arrangement’. A BNPL arrangement is an arrangement or a series of arrangements:

• under which a person (the merchant) supplies goods or services to a consumer; and
• under which a third person (the BNPL provider) directly or indirectly pays the merchant an amount that is some or all of the price for the supply mentioned in paragraph (a); and
• that includes a contract between the BNPL provider and the consumer under which the BNPL provider provides credit to the consumer in connection with the supply mentioned in paragraph (a).

The Amending Act also introduced a sub-category of BNPL contracts, referred to as low cost credit contracts (LCCCs). Essentially, these are BNPL contracts that do not exceed the fee caps set out in the National Consumer Credit Protection Regulations 2010. The fee caps are as follows:

• if only default fees or charges are payable: $320 in default fees for the first 12 months, then $245 every following year; or
• if default fees and other fees (such as account fees) are payable: $200 in other fees plus $120 in default fees for the first 12 months, then $125 in other fees plus $120 in default fees every following year.[2]

What are the key requirements?

As a result of the reforms, BNPL providers are required (subject to transitional arrangements) to:

• hold an ACL;
• be a member of the Australian Financial Complaints Authority;
• comply with the general obligations that apply to all credit licensees under section 47 of the National Credit Act, including the obligation to act ‘efficiently, honestly and fairly’;
• comply with RLOs;
• follow the hardship procedures set out in section 72 of the NCC;
• comply with disclosure requirements, such as providing a credit guide and disclosing certain matters in credit contracts; and
• ensure that ‘reportable situations’ are reported to ASIC within the required timeframes.

Modified obligations for LCCC providers

LCCC providers can elect to either be subject to a ‘modified’ RLO framework or comply with the existing RLOs that apply to other types of consumer credit. The LCCC provider must disclose in writing if it elects to be subject to the modified RLO framework.[3]

Under the modified RLO framework, LCCC providers are still required to undertake reasonable inquiries and verification of the consumer’s financial situation, requirements and objectives. However, in determining what constitutes ‘reasonable’ inquiries and verification, the LCCC provider must take into account the factors set out in section 1333BXC(3) of the National Credit Act, including the nature of the LCCC and whether consumer is financially vulnerable. These factors are intended to reduce the scope and intensity of existing information gathering and verification requirements, but not always have this effect.[4]

LCCC providers that elect to be subject to the modified RLO framework will be required to complete credit checks on applicants[5] and have a written ‘unsuitability assessment policy’.[6]

LCCC providers can also take advantage of the ‘protected increases’ provisions, which allow the LCCC provider to undertake an initial assessment for a credit limit that is larger than the LCCC that is being entered into. The LCCC provider can then provide subsequent credit limit increases to consumers over time, up to the larger amount, without making a new assessment. Increases must occur within 2 years of the initial assessment date.[7]

Need further assistance?

If you are an existing BNPL provider, or you are considering launching a BNPL business, get in touch with our team of experts for further assistance. We can provide you with legal, licensing and compliance support to help your business comply with the BNPL reforms.

You can find out more about our consumer credit legal and regulatory support here: Consumer & Credit Law – Legal and Regulatory Support

Author: Katherine Temple (Special Counsel)

[1] Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024. See also RG 281 Low cost credit contracts | ASIC.

[2] Regulation 69G of the National Consumer Credit Protection Regulations 2010.

[3] Subsection 17(15B) of the National Credit Code.

[4] Paragraph 2.33 of the Explanatory Memorandum to the Amending Act.

[5] Regulation 28HAD of the National Consumer Credit Protection Regulations 2010.

[6] Section 133BXG of the National Credit Act.

[7] Section 133BXD of the National Credit Act.