Use Now, Regulate Later?

The Competing Regulatory Approaches of the Buy-Now, Pay-Later Sector and Consumer Protection in Australia

Abstract

The Buy-Now, Pay-Later (‘BNPL’) sector in Australia provides a stark example of the challenge facing regulators in balancing consumer protection with innovation. This article examines the current regulatory responses and recommends reforms to enhance consumer protection outcomes and better achieve this balance. Firstly, it determines the actions of the Reserve Bank of Australia and the Australian Securities and Investments Commission (‘ASIC’) inadequately protect consumers. Concurrently, the industry’s self-regulatory Code of Practice lacks sufficient regulatory oversight to be meaningfully effective. Two recommendations are given: firstly, allowing merchants to surcharge the costs of the BNPL service; and secondly, giving ASIC oversight of the Code of Practice, in conjunction with targeted regulatory action. These recommendations would protect consumers, better enable competition, and facilitate the BNPL sector’s continued growth.