Shares in Zip and Afterpay owner Block have fallen after Financial Services Minister Stephen Jones outlined plans to introduce new regulation into the buy now, pay later (BNPL) space.
In an address to the Responsible Lending and Borrowing Summit on Monday, Mr Jones confirmed that the Albanese government would be proceeding with the middle option outlined in its consultation late last year, which will see BNPL products regulated as credit products.
BNPL providers will be required to hold an Australian Credit Licence (ACL), comply with responsible lending obligations, and meet dispute resolution and hardship requirements.
They will also be required to comply with statutory product disclosure and other information obligations, obey existing restrictions on unacceptable marketing, and meet a range of other minimum standards in relation to their conduct and their products.
“Our plan will give ASIC strong enforcement powers. And our plan will involve industry consultation on the detail,” Mr Jones explained.
“Our plan will bring BNPL into line with other regulated credit providers, simplifying our regulatory system, and addressing concerns about competitive neutrality.”
Zip’s share price closed down 4.35 per cent to $0.55 following the announcement on Monday, while Block’s share price closed down 1.35 per cent to $88.00.
Zip co-founder and global chief operating officer Peter Gray welcomed the government’s plans in a statement to the ASX.
“Zip has been a vocal advocate of fit-for-purpose regulation for our industry since 2019 and we support the decision to further strengthen the BNPL regulatory framework proposed by Treasury as option two,” he said.
Mr Gray said that the framework would mean “business as usual” for Zip as the firm already has an ACL. He noted that Zip Money is fully regulated under the National Consumer Credit Protection Act and that Zip currently conducts identity, credit, and affordability checks.
“We look forward to further engaging with Treasury and government on next steps, knowing that option two provides a sensible balance between consumer protection and minimum standards, whilst also promoting competition and innovation,” he added.
A spokesperson for Afterpay said that the government’s announcement represented a “strong first step in the development of a fit-for-purpose buy now, pay later regulatory framework”.
“We look forward to working with the government, consumer groups, and other stakeholders to get the details right in the coming months and build on the many consumer protections we already provide and set high industry standards across the board for all providers of a BNPL service,” the spokesperson said.
Humm Group, whose share price dipped 1.19 per cent to $0.42 on Monday, also welcomed the government’s regulatory plans as a “balanced and proportional approach to ensuring consumer protection and promoting responsible lending practices within the BNPL sector”.
BNPL legislation by the end of the year
Mr Jones said that the government is aiming to have exposure draft legislation released for consultation later this year before introducing a final bill into parliament by the end of the year.
“The responsible lending regime will be central to our approach. However, our legislation ensures that the obligations on BNPL providers are scalable and technologically neutral. We will make sure they are the right fit for the risk level of their products,” he said.
He suggested that BNPL products had created “many opportunities across the Australian economy” and delivered benefits to both consumers and businesses.
“But with those opportunities have come new and growing dangers to consumers, which up until now have been largely unregulated and unchecked,” Mr Jones added.
Mr Jones said that the government believes it had struck a balance with its BNPL regulation, which he described as a “strong” and “proportionate” solution.
“Our plan maintains the benefits of BNPL that many Australians enjoy, and we must ensure that providers will have appropriate safeguards in place, and we must ensure that they operate honestly, efficiently, and fairly, in line with other regulated credit products. And we want to work with you on the detail,” he told the Responsible Lending and Borrowing Summit.
“Over the coming months, Treasury [will] be working closely with the industry and with consumer groups, to make sure we get it right.”
The Australian Finance Industry Association (AFIA), which introduced its BNPL Code of Practice in 2021, also expressed its support for the government’s plans and said that it would continue to work collaboratively with the government on the details of future regulation.
