Big changes have arrived for Buy Now, Pay Later (BNPL) services in Australia, bringing them under the same regulations as credit cards.
For those unfamiliar with BNPL, they are payment services (like Zip and Afterpay) that allow people to purchase goods and then pay for them in instalments.
Previously, BNPL providers operated outside traditional credit laws, making it easier for consumers to access short-term loans without stringent checks. But concerns about financial hardship and missed repayments have led to new rules aimed at protecting users.
Under the updated legislation, BNPL providers must hold an Australian credit licence and comply with responsible lending obligations. This includes hardship requirements and minimum standards of conduct.
BNPL providers must also now join the Australian Financial Complaints Authority (AFCA), giving people access to independent dispute resolution if issues arise.
For everyday users, the changes mean BNPL services will feel more like traditional credit products.
If you fail to make BNPL repayments on time, it could negatively impact your credit score (making it harder to secure loans in the future) – just like missing payments on a credit card. On the flip side, responsible BNPL usage – like making payments on time – may help build a positive credit history.
While the new rules may add extra steps to signing up to BNPL services, they aim to prevent financial strain and ensure people aren’t borrowing beyond their means.
Many people who use BNPL services consider them to be a convenient way to spread out payments when spending on consumer goods. But it pays to be mindful about potential long-term impacts they may have on financial health and borrowing habits.
As with any credit product or service, responsible use is key. It’s always worth regularly reviewing your budget to ensure repayments won’t become a burden, especially if you’re relying on BNPL for essential purchases.
So next time you’re thinking of using credit for your next pair of jeans or weekend getaway, remember that it’s still often cheaper to pay with your own money, at least in the long run.
As always, if you or someone you know wants to improve their financial health, speaking with a financial adviser can help.
To book an appointment, call me at Align Financial on (02) 9913 9995.
