Government Warns to Impose Stricter Rules for Buy Now, Pay Later Sector

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The government has warned the booming buy now, pay later sector that it will be subject to stricter rules if consumer protection is not improved.

In an interview, Financial Services Minister Stephen Jones said, “The government is considering tougher rules for the rapidly growing buy now, pay later sector.”

This comes after concerns about the industry’s lack of consumer protection. Jones warned that the sector could soon face the same oversight as credit cards or loan products if improvements are not made.

Jones said, “We want innovation, we want people to have access to these great products, but we want to ensure that there are proper guardrails in place.”

The Federal government has flagged stricter regulation for Australia’s multi-billion-dollar buy now, pay later (BNPL) industry, which is snowballing.

Concerns have been raised about the lack of consumer protection in the industry, with the government warning that it could soon face the same oversight as credit cards or loan products if improvements are not made.

According to the RBA, in the six months of 2021, the value of BNPL transactions was the equivalent of 1.7 % of Australian card purchases, with providers processing around $11.5 billion.

Twenty-one per cent of BNPL customers had missed a payment. It was reported in a 2020 report from the corporate watchdog ASIC.

Jones said, “We don’t want to see people in the same situation they were in the bad old days of the credit market where they might have had five, six, seven or eight credit cards.”

It is estimated that almost 20 BNPL services are offered by more than a dozen providers in the Australian market. This industry is overgrowing, with concerns being raised about the lack of consumer protection.

The government has warned that stricter rules could soon be imposed on the sector if improvements are not made.

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