BNPL Licensing Begins Under the Credit Act, Adding New Checks That Intersect With Payday Loan Assessments

From 10 June 2025, Buy Now Pay Later services in Australia operate under the same regulatory framework that governs payday loan, marking a significant shift in consumer credit oversight. A long-standing regulatory vacuum affecting almost seven million active BNPL accounts nationwide is closed by the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024.

Due to this legislative change, BNPL providers are now subject to the National Consumer Credit Protection Act 2009, which requires them to perform affordability assessments similar to those that payday loan companies have been required to perform since 2010. The implications extend across Australia’s $19 billion BNPL market, fundamentally altering how consumers access short-term credit.

Regulatory Framework: From Exemption to Full Compliance

BNPL services previously operated outside traditional credit regulation due to exemptions in Schedule 1 of the Credit Act. These exemptions applied because most BNPL products charged no interest, instead generating revenue through merchant fees and late payment charges. This structure allowed providers to approve credit within minutes without verifying income or assessing repayment capacity.

The new legislation reclassifies BNPL products as “low cost credit contracts” (LCCCs) under the National Credit Code. Following royal assent on 10 December 2024, providers had six months to obtain Australian Credit Licences and implement compliance systems. This timeline mirrors the regulatory approach previously applied to small amount credit contracts, commonly known as payday loans.

The Australian Securities and Investments Commission released Information Sheet 285 in January 2025, detailing licensing requirements for BNPL providers. Transitional arrangements permit continued operation only for providers who submitted complete licence applications before the 10 June deadline. ASIC maintains authority to reject incomplete submissions, potentially forcing non-compliant operators to cease business.

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Parallel Assessment Requirements: BNPL Meets Payday Loan Standards

The convergence of BNPL and payday loan regulation centres on responsible lending obligations. Both product categories now require providers to complete three core assessment steps before approving credit applications.

First, providers are required to reasonably inquire about the applicant’s financial situation, including sources of income, routine costs, and outstanding debts. Secondly, they are required to take reasonable measures to confirm the information supplied, usually by using government benefit statements, bank statements, or paystubs. Third, they must assess whether the proposed credit would be unsuitable for the consumer, meaning repayments could only be met with substantial hardship.

For payday loans, the National Consumer Credit Protection Act mandates review of 90 days of bank statements and prohibits lending where consumers already hold two or more small amount credit contracts. BNPL providers under the modified LCCC framework can adopt slightly relaxed verification for contracts under $2,000, conducting “negative credit checks” that identify defaults and payment issues without requiring full bank statement analysis.

This changed strategy, according to industry analysts, reflects the generally lower risk profile of BNPL transactions when compared to traditional payday lending. Regardless of product structure, the basic idea is still the same: credit providers must confirm affordability prior to approval.

Consumer Impact: Five Operational ChangesCredit Reporting Integration

BNPL transactions now appear on consumer credit files. Providers offering facilities exceeding $2,000 must participate in comprehensive credit reporting, sharing repayment history data with credit bureaus. This integration means late or missed BNPL payments affect credit scores similarly to defaults on personal loans or credit cards.

Research indicates 32% of BNPL users lack understanding of credit scoring mechanisms, creating potential for unintended credit file damage. The credit reporting requirement aligns BNPL with mainstream credit products, ending the historical anomaly where significant payment obligations went unreported.

Mandatory Affordability Assessments

Applications now require detailed financial disclosure. Providers must collect information about income, housing costs, essential expenses, and existing credit commitments. The assessment process takes considerably longer than the 90-second approvals common under the previous self-regulatory framework.

Platforms like MeLoan have adapted their processes to incorporate these verification requirements while maintaining reasonable application timeframes. The shift prioritises sustainable lending over instant gratification, reducing risks of debt accumulation among financially vulnerable consumers.

Enhanced Dispute Resolution Access

All BNPL users gain access to Australian Financial Complaints Authority dispute resolution services. AFCA provides free, independent complaint handling for consumers unable to resolve issues directly with providers. Compared to the voluntary industry code that previously controlled BNPL activities, this is a significant improvement.

Membership in AFCA is required to guarantee uniform complaint handling throughout the industry. In order to give customers several options for recourse, providers must also put in place internal dispute resolution processes that adhere to ASIC criteria.

Financial Hardship Provisions

Regulations now demand hardship support that is comparable to the safeguards afforded to borrowers of payday loans. When customers encounter brief financial difficulties, providers must take into account requests for payment deferrals, fee waivers, or altered repayment plans.

Providers are prohibited from pursuing collection actions, charging extra late fees, or reporting defaults to credit bureaus during hardship consideration periods. These safeguards stop temporary setbacks from developing into long-term harm to credit records.

Fee Structure Transparency

Exposure draft regulations specify maximum fees qualifying products as low cost credit contracts. Late payment fees face caps, and providers must deliver clear upfront disclosure of all potential charges. This transparency requirement mirrors consumer protections established for small amount credit contracts following reforms in 2012 and 2013.

Industry Compliance and Enforcement Landscape

BNPL providers faced substantial operational overhaul to meet June 2025 compliance deadlines. Beyond licence acquisition, requirements included drafting written unsuitability assessment policies, creating precontractual disclosure statements, updating terms and conditions, implementing credit reporting infrastructure, and establishing AFCA membership.

Major market participants including Afterpay, Zip, and Klarna invested significantly in compliance systems throughout 2024 and early 2025. Smaller providers faced particular challenges, with some exiting the market rather than absorbing compliance costs.

ASIC’s enforcement approach draws on precedents from payday loan regulation. In February 2025, the regulator warned small and medium amount credit contract providers about potential responsible lending breaches, noting trends of lenders shifting borrowers to products with fewer consumer protections. Civil penalties totalling $16 million against payday lender Ferratum Australia demonstrate regulatory willingness to pursue serious contraventions.

The compliance framework includes ongoing supervision requirements. Providers must regularly review their unsuitability assessment policies, maintain evidence of verification procedures, and demonstrate compliance with responsible lending obligations. ASIC can conduct targeted reviews, request documentation, and initiate enforcement proceedings where systemic issues emerge.

Broader Credit Market Implications

The BNPL regulatory integration creates consistency across Australia’s consumer credit landscape. Providers offering similar economic functions now operate under comparable legal obligations, regardless of product labelling or fee structures.

Consumer advocates have identified wage advance products as a potential next regulatory target. These services, which provide access to earned wages before standard pay cycles, currently operate with minimal oversight despite functional similarities to payday loans. The BNPL precedent suggests regulators may extend LCCC classification to additional product categories exhibiting credit characteristics.

Research data indicates BNPL adoption reached 40% among Australians aged 18 to 39 in 2023, with transaction values growing 13% annually. Regulatory intervention aims to sustain market innovation while preventing the debt accumulation patterns observed in unregulated environments. Studies documented instances where consumers maintained multiple BNPL accounts totalling debt levels exceeding traditional credit card or payday loan limits.

Financial comparison services including MeLoan now incorporate BNPL products alongside traditional credit options, enabling consumers to assess affordability across different lending structures. This integration supports informed decision making, particularly for users comparing BNPL against alternatives like personal loans or credit cards.

Consumer Action FrameworkPre-Application Preparation 

Before seeking BNPL credit, consumers should review their credit files through free services like CreditSmart, calculate disposable income after essential expenses, consolidate existing BNPL commitments where possible, and understand how applications affect credit scores.

Active Account Management

Existing BNPL users benefit from establishing payment reminders across all accounts, monitoring credit reports for accuracy, contacting providers immediately when financial difficulty emerges, and exercising hardship rights proactively rather than waiting for defaults.

Support Service Access 

The National Debt Helpline (1800 007 007) provides free, confidential financial counselling for Australians experiencing payment difficulties. Counsellors assist with budget development, creditor negotiation, and navigation of regulatory protections. Early intervention prevents minor setbacks from compounding into serious credit file damage.

The regulatory alignment between BNPL and payday loan frameworks represents the most significant consumer credit reform since small amount contract regulation commenced in 2012. For Australia’s seven million BNPL users, the changes deliver enhanced protections at the cost of reduced access speed. The framework aims to prevent unsuitable lending while preserving legitimate credit access for consumers who can demonstrate repayment capacity.

As the regulatory landscape matures, ongoing monitoring will assess whether modified responsible lending obligations strike an appropriate balance between consumer protection and financial inclusion objectives.