ARCA (Australian Retail Credit Association) media release, Monday 23 January 2023
The Australian Retail Credit Association (ARCA) reiterates its position that Buy Now Pay Later (BNPL) should be regulated as credit to protect consumers from harm.
In its submission to Treasury’s Regulating Buy Now, Pay Later in Australia consultation process, ARCA maintains its long-held position that BNPL is credit and should be regulated as such under the National Credit Code. BNPL is already credit under the Privacy Act definitions.
ARCA CEO Elsa Markula said the time has come for BNPL to be recognised and treated like other consumer credit products.
“We’re happy to move beyond asking how BNPL should be characterised, and instead move to ensuring that BNPL is properly integrated within the existing credit regulatory and reporting framework,” Ms Markula said.
ARCA General Manager, Policy and Advocacy, Michael Blyth said the existing credit regulatory framework is designed to be comprehensive and flexible and can readily accommodate BNPL credit.
“The rules in the National Credit Act are meant to be comprehensive and flexible. While there may need to be some fine-tuning of the framework to address issues specific to BNPL credit, this does not provide a reason not to regulate or to leave the risks of harm in place,” Mr Blyth said.
ARCA plays a unique role in the credit space, with strong expertise in credit reporting and technical standards, having drafted key components of the legal framework supporting credit providers and consumers, including the Credit Reporting Code and industry rules for data sharing.
ARCA also has significant BNPL experience, with many ARCA members either providing BNPL products or seeking to understand the impact of BNPL credit within their own credit assessment processes.
Through its role in developing and improving the credit reporting system, ARCA works with credit providers, credit reporting bodies and other stakeholders to ensure that system readily facilitates reporting of data about BNPL products.
Critically, ARCA believes the credit reporting system will provide a recognised, robust, and objective means to verify the creditworthiness of BNPL users and help ensure BNPL credit is only offered to those who can afford it.
Ms Markula added BNPL participation in credit reporting will play a critical role for all credit providers.
“By including BNPL in credit reporting, all credit providers will be able to gain better insights into the BNPL sector.
For BNPL providers, inclusion in credit reporting will ensure products are better tailored to those customers who use BNPL responsibly, including as a budgetary tool, and will allow credit providers to more readily identify customers at risk of over-indebtedness.”
Further, ARCA’s submission to the Treasury review relied on insights provided by Good Shepherd Australia and New Zealand in its recent report on the role of BNPL in exploiting customer vulnerability.
Mr Blyth said the Good Shepherd report identified real risk of customer harm in BNPL.
“It is important adequate regulation exists to manage the risk of consumer harm and, moreover, that the credit reporting system is used to provide the insights necessary to identify the potential for harm. Proper visibility of BNPL through the credit reporting system allows all credit providers to make better lending decisions, and means consumers should only receive credit they can afford to repay,” Mr Blyth said.
This view is shared by Financial Rights Legal Centre, who have welcomed ARCA’s submission.
Karen Cox, Chief Executive Officer of FRLC said, “I welcome the support provided by industry bodies like ARCA for the regulation of BNPL products under the existing credit law framework.”
ARCA notes regulating BNPL under the National Credit Code will mean the information included in credit reports will be even more holistic.
To support this, ARCA is working with credit providers and credit reporting bodies to optimise how BNPL is reflected in credit reports.
“The existing framework can readily be improved to ensure that both consumers and industry obtain key insights about BNPL customer behaviour, but are not overwhelmed by the volume of data,” Ms Markula said.
Additionally, ARCA’s submission clearly identifies that the more time sensitive nature of BNPL reporting can easily work alongside the current credit reporting framework.
“Credit reporting processes can be extremely timely, and the system is well-equipped to work alongside the time sensitive nature of BNPL accounts,” Ms Markula added.