New law to require credit licences for providers of buy now, pay later products

Australian Securities and Investments Commission urges providers to comply with June deadline

New law to require credit licences for providers of buy now, pay later products

Buy now, pay later products will soon face stronger regulation with a new legal regime that seeks to better protect this country’s consumers, the Australian Securities and Investments Commission (ASIC) has said.

The Treasury Laws Amendment (Responsible buy now, pay later and Other Measures) Act 2024, received royal assent on 10 December 2024, the ASIC noted in a news release. This law amended the National Consumer Credit Protection Act 2009 to extend a modified form of the National Credit Code to buy now, pay later contracts.

Under the new regime, a provider of these contracts should hold a credit licence by 10 June to meet the updated licensing requirements, the news release said. The licence gives the provider the authority to engage in credit activities as a credit provider, subject to transitional arrangements.

These transitional arrangements permit a provider of buy now, pay later contracts to continue providing such contracts if it has applied for and has obtained acceptance of its application for the proper credit licence or its requested variation of an existing credit licence, the news release explained.

A provider of such contracts without a credit licence should – before 10 June – apply for a credit licence, secure the ASIC’s acceptance of its application for lodgement, and become a member of the Australian Financial Complaints Authority, the news release said.

On the other hand, a provider of these contracts with a credit licence authorising them to engage in credit activities relating to credit contracts should know that this authorisation will also apply to buy now, pay later contracts, the news release stated.

If the provider of such contracts has a credit licence not authorising them to engage in credit activities as a credit provider, it needs to apply for a variation, the news release added.

ASIC urges early action

The news release encouraged buy now, pay later providers to lodge their applications ideally by 11 May so that they could benefit from the transitional arrangements and so that the ASIC could accept a complete application by 10 June.

The ASIC stressed the importance of acting early for an application or a variation of a credit licence, given that the application requires certain information that can take some time, including criminal history checks.

A provider of these contracts that continues to operate without the ASIC’s acceptance of its application for lodgement by 10 June may be participating in unlicensed conduct, warned the ASIC’s news release.

The news release noted that the updated legal regime will also change some obligations for buy now, pay later contracts meeting the definition of a low-cost credit contract. ASIC said that it plans to release regulatory guidance as the new regime approaches.