NEW CONSUMER PROTECTIONS FOR BUY NOW, PAY LATER

There has been tremendous growth and proliferation in recent years of what have come to be known as ‘Buy Now, Pay Later’ or ‘BNPL’ products or payment options. Until now these products have been largely unregulated. This is about to change, with some new consumer protections for buy now, pay later products.

What is Buy Now, Pay Later?

You will probably have heard of – and may even have used – some of the more prominent brands like Afterpay, Brighte, Humm, Klarna, LatitudePay, Payright, Plenti, StepPay, and Zip Pay. Essentially, as the name on the tin suggests, these products allow the consumer to buy something now and pay for it later in instalments, for example four equal payments over a period of six weeks. Unlike other forms of credit, there is usually no interest payable. The catch is that if you miss one or more of your scheduled payments, late fees may be applied. These late fees can be quite steep as a percentage of the purchase price.

How popular has Buy Now, Pay Later become?

In spite of these pesky late fees, which amount to tens of millions dollars a year owed by Australian consumers; Buy Now, Pay Later has grown with staggering rapidity. Estimates vary, but many have Australians using it for more than $20 billion worth of transactions this year.

A few years ago, we started hearing from some – particularly younger – ADF members in our education sessions that they liked using these products for smaller consumer goods purchases, that they found them convenient and that they used them frequently. We wrote at the time about the potential benefits and risks of using Buy Now Pay Later.

What’s not to love?

It may seem too good to be true. “Free money.” You get what you want now and can pay it off over a few weeks. A kind of Gen Z lay-by. As long as you make the payments on time that is. One big potential problem has been that Buy Now Pay Later has been largely unregulated… until now.

You may think – and we would say accurately – that Buy Now Pay Later is just another form of credit.  A new fan-dangled fintechy one granted. But credit, just the same. Interestingly and perhaps because of its relative novelty, it has not been regulated like other consumer credit services. This has meant that consumers did not enjoy the same consumer credit protections that they do when they are using a credit card; or taking out a personal loan. For example, the right to ask for financial hardship arrangements. Potentially making Buy Now, Pay Later risky for some consumers.  We have heard from our colleagues working in financial counselling, helping people who are struggling with debt, that these products have increasingly become a cause of financial hardship for some of their clients.

Some new consumer protections for Buy Now Pay Later

From 10 June 2025, Buy Now, Pay Later providers will need to hold an Australian credit licence and the arrangements they enter into with consumers will be subject to similar protections to other forms of credit. This will include the ability of consumers to make a complaint to the Australian Financial Complaints Authority if they believe their service provider is not complying with its obligations. In the meantime, if you or someone you care about has trouble with a Buy Now Pay Later service there are practical steps you can take. There is also information on our site for anyone experiencing money troubles, whether these relate to Buy Now, Pay Later or not.

Finally, here are some top tips to protect yourself when using Buy Now, Pay Later products:

• Read the terms and conditions carefully before using Buy Now, Pay Later
• Treat Buy Now, Pay Later like any other form of credit
• Consider the total cost including potential late fees
• Only borrow what you can comfortably repay
• Keep track of all your Buy Now, Pay Later commitments across different providers
• Make payments on time to avoid late fees