From today, Australians using buy now, pay later (BNPL) services such as Afterpay, Klarna, or Zip Pay will be under stricter regulations akin to traditional credit products like credit cards. This move, driven by the Australian Securities and Investments Commission (ASIC), aims to protect users from potentially detrimental credit contracts.
The new regulations mandate that BNPL providers must now obtain a credit licence and adhere to established credit laws. For new customers, this means more extensive financial assessments before borrowing, including credit checks and inquiries about their financial circumstances. As a result, new users may see their initial spending limits, previously uniform at around $600 from Afterpay, adjusted based on their creditworthiness.
While existing BNPL account holders are exempt from immediate credit checks, their transaction history may still influence their credit scores in the future. Recent data revealed that two in five Australians had utilised a BNPL service in the past six months, with younger generations being the most frequent users.
Under the new rules, missed or late payments will also have serious implications; these may harm borrowers’ credit ratings and appear on credit reports, complicating future loan applications. Therefore, consistent on-time payments could bolster an individual’s credit score, whereas defaults can severely limit their opportunities for significant purchases, such as homes.
In summary, the update to BNPL regulations reflects a more structured approach to credit in Australia, aiming to mitigate risks for consumers and ensure responsible lending practices. It is important for users to be aware of these changes as they navigate their financial choices moving forward.