ASIC Wants Purview on BNPL: Likely to Issue ‘Standalone’ Guidance

The Australian Securities and Investments Commission’s Commissioner Kate O’Rourke has confirmed that the regulator will likely issue standalone guidance related to low-cost credit contracts, which include buy now, pay later (BNPL). It will focus on addressing modified responsible lending obligations and other obligations.

However, introducing the guidance depends on further consideration, as the regulator is set to consult with stakeholders before finalising it. Notably, Australian lawmakers have also introduced draft legislation into Parliament to bring BNPL under the National Credit Act.

Regulatory Move into BNPL

BNPL allows retail consumers to access small credits when purchasing goods and services, mostly online. These micro credits are usually interest-free but incur heavy interest if the consumer fails to repay them on time.

The popularity of BNPL has exploded in recent years. The global sector is expected to grow at a rate of 20.7 percent between 2021 and 2028. Furthermore, the worldwide transaction volume on these platforms is likely to reach $680 billion by 2025, with the US alone expected to contribute $100 billion.

The space is so lucrative that giants like Apple and Visa have also started to offer BNPL services in various forms. Klarna, an early mover in this industry, is now considering a public listing.

Meanwhile, regulators are taking an interest in the rapidly growing BNPL sector. Recently, the United Kingdom’s Financial Conduct Authority welcomed the government’s consultation on regulating currently exempted BNPL products. Additionally, the Consumer Financial Protection Bureau (CFPB) in the US has issued new guidelines for BNPL providers in the country.

The Concerns of Scams

ASIC’s Commissioner also addressed the issue of rampant financial scams, stating that the regulator’s “concerns included the significant variability in the maturity of scam strategies and governance, inconsistent and narrow approaches to determining liability, and a lack of support for scam victims.”

She highlighted that the total value of scam transactions made by customers amounted to $232 million. However, only 19 percent of that value was detected and stopped by the banks, whereas 20 percent of the funds were recovered. In the meantime, 96 percent of the total scam losses were borne by the customers.

“To tackle the ongoing scourge of scams, the government is proposing to introduce a Scams Prevention Framework, to be jointly administered by the ACCC, ASIC, and the Australian Communications and Media Authority (ACMA),” O’Rourke added.

“This will impose anti-scam obligations on key sectors in the scams ecosystem – including banks. Consultation has recently closed on exposure draft legislation for the Framework.”