BNPL providers now require an Australian Credit Licence

Obligation to hold an Australian credit licence

If you engage in credit activities, you will generally be required to have an Australian credit licence (ACL) and comply with credit laws and licence conditions.

Until recently, most Buy Now Pay Later (BNPL) products were not covered by the National Consumer Credit Act (Credit Act) meaning BNPL products were not subject to responsible lending standards or other requirements of the Credit Act, and providers were often not required to hold a credit licence.

BNPL now covered

Following royal assent of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 on 10 December 2024, the Credit Act has been extended to BNPL products, meaning operators and providers of BNPL products are required to comply with existing credit laws.

From 10 June 2025, the new legislation will take effect, meaning providers of BNPL contracts will need to hold an ACL that authorises them to engage in credit activities as a credit provider, subject to transitional arrangements. Ahead of the new laws coming into effect, ASIC has published Regulatory Guide 281 Low cost credit contracts to help BNPL providers understand their obligations under the new regime.

Under the new laws, providers of BNPL services must hold an ACL and comply with the Credit Act, with some modifications. The new legislation introduced low-cost credit contracts (LCCCs) as a new category of regulated credit, with BNPL contracts a sub-category of LCCCs. As a result, previously unregulated or lightly regulated credit products are included in the scope of the Credit Act. Therefore, providers of LCCCs are now required to hold an ACL and must comply by RG 281, specifically in the assessing of consumer compatibility to the credit product.

What is a BNPL contract?

A BNPL contract is a part of a BNPL arrangement, this is an arrangement where:

• a BNPL provider directly or indirectly pays a merchant some, or all, of the price of goods or services purchased by a consumer; and
• there is a contract between the BNPL provider and the consumer for the provision of credit in relation to the transaction.

Considerations for BNPL providers and operators

BNPL providers will be required to comply with obligations, including:

• assessing the suitability of the LCCC for the consumer;
• taking steps to make reasonable inquiries about the consumer’s financial situation; and
• verifying that information.

However, for providers of BNPL contracts, the obligations will be modified to reflect the lower risk and cost of BNPL compared with other regulated forms of credit. Importantly, BNPL providers will need to elect in writing to apply the modified framework, otherwise the existing framework will apply.

Preparing for the changes

Under the new regime, providers of BNPL contracts will need to hold a credit licence by 10 June 2025. Under transitional arrangements, providers are permitted to continue providing such contracts if it has applied for and obtained acceptance of its application for the required credit licence, or if its requested variation of an existing licence. Providers will also need to become a member of AFCA.

BNPL providers should be aware of the changes and understand how the new requirements apply. Providers should consider what changes are required to ensure compliance with the new regulatory framework to ensure a smooth transition when the law takes effect on 10 June 2025.

For more information, email cmee@cnmlegal.com.au or amcaliece@cnmlegal.com.au, or call 07 3211 4010.

This paper is produced as general information in summary for clients and should not be relied upon as a substitute for detailed legal advice or as a basis for formulating business or other decisions. CNM Legal asserts copyright over the contents of this document.