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Law Current to: September 17, 2025
BNPL & Unregulated Credit
Buy Now Pay Later (BNPL)
Buy Now Pay Later are arrangements where a lender provides credit that allows customers to pay off the cost of purchasing goods or services in instalments.
BNPL is commonly offered by sellers of furniture, jewellery, whitegoods, and electronic equipment. Although arrangements differ with each BNPL provider, many allow customers to set up accounts that allow them to make purchasers up to an approved amount. Some providers will charge customers an account fee but not interest on the amounts borrowed. Instead of charging interest, BNPL providers usually charge the merchant a fee for using their service. They also charge the customer late fees if they don’t pay their instalments in time.
For people on low incomes, BNPL was an attractive and accessible form of credit because, historically at least, they involved easy approvals, few or no credit checks, no interest charges, and instant access to goods and services with the ability to delay payment. In some instances, BNPL products were a better alternative to high-cost small amount credit. However, BNPL can also encourage impulse spending and spending more than one can afford, which can quickly result in consumers spiraling into debt. Furthermore, if a consumer misses a BNPL payment, this can result in:
- default fees and interests which can be substantial; and
- a default being listed on their credit report which will impact their ability to access credit in the future.
BNPL has historically been unregulated because providers do not charge interest or fees for the provision of credit to the consumer. As no interest was charged, the products did not meet the definition of credit within the Nation Consumer Credit Protection Act 2009.
However, the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 amended the Nation Consumer Credit Protection Act 2009 (National Credit Act) to extend the application of the National Credit Code to BNPL contracts. For the purposes of determining whether or not a BNPL contract is regulated by the National Credit Act some of the usual considerations are disregarded. See the new section 13B(2) for the exclusion of these usual tests. In particular:
- it is not necessary to establish that the credit provider will make a fee or charge to the consumer for the provision of the credit;
- the exemption for short term credit arrangements of 62 days is not available. This exemption would otherwise be available under section 6(1) of the NCC.; and
- the exemption for credit for which only a account charge is payable is also not available. This exemption would otherwise be available under section 6(5) of the NCC.
From 10 June 2025, providers of BNPL contracts will need to hold a credit licence that authorises them to engage in credit activities as a credit provider, subject to transitional arrangements.
Transitional arrangements allow a BNPL provider to continue to provide BNPL contracts where they have applied for and had their application accepted for the appropriate Australian credit licence or variation of their existing credit licence. The transitional relief will apply until the credit licence application is determined by ASIC. During any transitional period BNPL providers are required to be a member of the AFCA and so customers will have access to external dispute resolution services available through that body.
As a result, BNPL contracts will start to be captured by the definition of ‘credit contract’ under the National Credit Code from 10 June 2025, and specific obligations will apply, including modified responsible lending obligations, requirements when making materials available electronically and provisions relating hardship, variation and enforcement.
What happens if the new legislative requirements do not apply to a BNPL provider?
Even where the new legislative requirements do not apply to a BNPL please note that if the lender was a subscriber to the Australian Finance Industry Association’s BNPL Code, they will still have contractually enforceable commitments under that Code.
Code compliant members include Afterpay, Brighte, Payright, Hummgroup, Plenti and Zip. These six BNPL providers represent an estimated 75% of the BNPL market based on the number of active accounts as at 30 June 2023.
These commitments include that:
- we will focus on customers;
- we will be fair, honest and ethical;
- we will keep you properly informed about our product or service;
- we will make sure our BNPL product or service is suitable for you;
- we will undertake an ongoing review of the suitability of our products or services;
- we will deal fairly with complaints; and
- we will support and promote this Code.
The commitments under the BNPL Code are enforceable by customers through AFCA.
Our client may wish to consider referring the matter to AFCA if the provider of the BNPL arrangement is a Code subscriber and we believe they may have breached their commitments under the BNPL Code. The full text of the Code is available here.
Unregulated Credit
Not all credit is regulated by the National Credit Act. For example, a loan made to an individual for buying equipment for a plumbing business would not be regulated. Consumers of unregulated credit do not receive the protections within the consumer credit laws.
We’ve outlined the test for determining if credit is regulated in the Understanding Regulated Credit resource.
However, consumers of unregulated credit may have some protection under other laws, including basic consumer protections contained in the ASIC Act.
Amounts owing to telecommunications, SPER and unilities
Debts may be owed other than under a loan or credit arrangement. These may include unpaid debts owed for goods or services including utilities and telecommunications, Centrelink debts, or government fines and penalties under the SPER regime. These debts are not regulated by the National Credit Act.
Please see our resource on Resolving SPER debts if your client has a debt being collected by SPER.
