New Obligations for Businesses Offering Buy Now Pay Later

The government recently announced it will introduce new regulations to extend the consumer protections in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to apply to Buy Now Pay Later (BNPL) schemes.

BNPL provides consumers with interest-free credit to buy goods and services and pay for them later. Consumer advocates have raised concerns that BNPL is ‘easy money’, which leads to vulnerable consumers taking on more debt than they can afford to pay back.

The CCCFA imposes certain obligations on lenders to protect borrowers. It does not, however, currently apply to BNPL.

While the new regulations are not yet finalised, it is expected that obligations for businesses offering BNPL will include:

•   Only charging reasonable default fees

•   Varying repayments on request when a consumer suffers unforeseen hardship

•   Offering financial mentoring services to consumers who miss payments, and

•   Being a member of an external dispute resolution scheme. 

The new regulations are expected to be introduced to Parliament later this year.

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