Australia has just rolled out some new rules for buy-now-pay-later (BNPL) services. Basically, BNPL providers now have to follow stricter guidelines and do background checks before handing out these loans. The Australian Securities and Investments Commission (ASIC) will be keeping a close eye on companies like Afterpay and Zip Co, making sure they’re playing by the consumer credit rules.
In the past, BNPL services got a free pass when it came to consumer credit regulations because they didn’t charge any interest. That meant they could offer quick, interest-free loans without digging too deep into people’s credit history, like a bank would have to when issuing a credit card. These loans let borrowers stretch out their payments over a few weeks or months, and they became quite popular, especially for those who needed a little financial breathing room. The problem is, those who are going through money issues and relying on BNPL services to get by for everyday living expenses are postponing the problem.
There are worries about people paying back what they owe and the impact it has on them. That’s why the Australian government has decided to label BNPL services as consumer credit products. It puts Australia in line with countries like Britain that already have similar rules in place.
The main goal here is to address the potential risks that come with BNPL services and make sure lenders are being responsible. With background checks and more oversight, Australia hopes to find a balance between making things convenient for consumers, without risking people’s financial well-being, which can only be a good thing.