Key points

• From 10 June 2025, Buy Now Pay Later (BNPL) products will be regulated as a new type of credit - ‘low cost credit contracts’ (LCCC) - under the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and National Credit Code (NCC).
• BNPL providers will be required to comply with a suite of licensing and responsible lending obligations originally only applicable to traditional credit providers.
• ASIC issued Consultation Paper 392 – Low cost credit contracts and draft Regulatory Guide 000 (RG 000) – Low cost credit contracts and sought feedback from industry.  

Introduction

On 10 December 2024, the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (BNPL Act) received royal assent, marking a significant shift in the regulatory landscape for BNPL products. 

In summary, the BNPL Act regulates BNPL products and imposes regulatory obligations on BNPL providers similar to those required of traditional credit providers. The reforms are stated to be aimed at balancing the advantages of BNPL products for consumers and the economy while minimising the harm caused by unaffordable lending practices.  

What’s changed

The BNPL Act introduces several key changes to the current regulatory framework that BNPL providers must navigate, such as:  

• (Licensing Requirements) Most BNPL products will be regulated as an LCCC. Even if a BNPL product does not meet the definition of an LCCC, it will be regulated as a credit contract under the NCC. Accordingly, all BNPL providers will be required to obtain and hold an Australian Credit License (ACL);
• (Modified Responsible Lending Obligations (RLO) framework) LCCC providers will have the option to ‘opt in’ to a modified RLO framework - a ‘scaled down’ framework tailored to the lower risk profile of LCCCs. Otherwise, the provider will be required to comply with the existing RLO framework; and
• (General Conduct Obligations) LCCC providers will be required to comply with the general conduct obligations of credit holders under the NCCP Act and NCC including pre-contractual disclosure. 

When do the changes apply? 

Pracically, these new obligations come into effect on 10 June 2025. 

What are Buy Now Pay Later arrangements? 

A buy now pay later arrangement is a category of a LCCC under which: 

• a merchant supplies goods or services to a consumer;
• a third person (BNPL Provider) directly or indirectly pays the merchant some or all of the price for those goods or services;
• the BNPL Provider contracts with the consumer for the provision of this credit; and
• it does not matter whether any fees or charges are payable by the consumer or merchant in connection with the arrangement or whether the goods or services have been supplied.

See below some of the key differences between LCCCs entered into before commencement (pre-commencement contracts) and LCCCs entered into on, or after commencement:

In the future, types of credit (e.g. wage advances) may also be captured under the regime.

New obligations of BNPL Providers

Licensing Requirements 

By 10 June 2025, BNPL providers will need to meet the following key licensing requirements:

• (Obtain an ACL) BNPL providers will be required to obtain and hold an ACL authorising them to engage in credit activities. If a provider is already licensed for a different type of credit activity, it may be required to vary its license to include other credit activities;
• (ASIC Approval) Providers must ensure their ACL application is accepted by the Australian Securities and Investments Commission (ASIC). ASIC has recommended BNPL providers lodge their applications by 11 May 2025 to benefit from the regime’s transitional arrangements, which allow BNPL providers to continue to provide BNPL credit contracts pending approval from ASIC; and
• (AFCA Membership) License holders must be a member of the Australian Financial Complaints Authority (AFCA).

NCCP Act Compliance

As licence holders, BNPL providers will now be required to comply with the general conduct obligations of license holders including:

• Acting efficiently, honestly and fairly;
• Ensuring competence (including of representatives) to engage in credit activities;
• Having appropriate resources (including financial, technological and human resources) and risk management systems;
• Ensuring clients are not disadvantaged by any conflicts of interest;
• Implementing a dispute resolution procedure that complies with ASIC-approved standards and requirements; and
• Having appropriate arrangements and systems to ensure compliance.

BNPL providers must also comply with obligations specific to traditional credit providers, including (but not limited to):

• Holding and complying with the relevant conditions of its ACL; and
• Complying with pre-contractual disclosure obligations requiring the BNPL provider to provide certain documents to customers containing information on the credit activities of the BNPL provider.

The anti-avoidance provisions in the BNPL Act prevent LCCC providers from structuring their business models to avoid regulation by the NCCP Act.

With one of ASIC’s enforcement priorities this year being ‘business models designed to avoid consumer credit protections’, BNPL providers should be careful when structuring their products to avoid breaching the scheme.

Compliance with modified RLO framework

Perhaps the most substantive change arising from the BNPL Act is the requirement for BNPL providers to comply with responsible lending obligations. Under the existing RLO framework, credit providers must assess whether entering into a credit contract or increasing a consumer’s credit limit is unsuitable for the consumer.

The BNPL Act introduces modification to the existing framework which allows BNPL providers to opt in to a “scaled down” version of the framework to reflect the lower risk profile of LCCCs compared to traditional credit products. BNPL products that are not LCCCs will be required to comply with the existing RLO framework.

Below are the main differences between the traditional framework and the modified framework. 

Next steps

BNPL providers should act early and ensure their licensing, policies and practices are compliant to avoid the risk of engaging in unlicensed conduct and receive the benefit of the transitional arrangements.

Our team can assist with all aspects of compliance including:

• preparing credit license applications;
• reviewing policies and all relevant documentation (including unsuitability assessment policies and pre-contractual disclosure statements); and
• advising on the modified RLO framework.

Please contact our team if you would like advice about these matters.