Blog: Lenders back BNPL regulation push – Mortgage Business

The paper, which was open to stakeholder feedback until 23 December, was launched after the government noted some of the financial distress faced by BNPL users and sought to “have a look at how to regulate it” and “put some guardrails around it”.

The paper put forward three regulatory options that the government could take:

  • Option 1: Strengthening the BNPL industry code and imposing an affordability test
  • Option 2: Require BNPL providers to obtain and maintain an ACL, plus introduce modified responsible lending obligations (RLOs) under the Credit Act
  • Option 3: Regulating BNPL under the Credit Act, with full RLOs

Full regulation to level the playing field: MONEYME

Personal lender MONEYME has flagged that regulating BNPL products would improve the accuracy of credit assessments for borrowers, level the playing field across lenders and BNPL providers, and close the credit reporting “blind spot” created by omitting BNPL from the Credit Act.

Speaking on the matter, MONEYME’s chief executive and managing director, Clayton Howes, said: “We are strong believers in responsible lending and responsible borrowing, for the sake of both consumers and lenders alike. So we welcome the federal government’s intention to improve consumer credit regulation, and in particular the proposals that would see BNPL providers subjected to the same obligations as other lenders.

“Accurate and extensive credit reporting allows lenders to be more accurate in our credit decisioning and, in turn, helps to protect consumers.

“The limitation of BNPL data in credit reporting creates a blind spot for lenders and hinders us from getting a holistic view of a person’s indebtedness and their ability to meet repayments. 

“Some of the changes proposed by the Treasury would also level the playing field in the industry. Similar onboarding requirements to other credit products in the market would impact the ease at which consumers can access BNPL, which might see consumers shift away from BNPL and back to credit cards.

With this advantage no longer in play, it would also make it less attractive for merchants to offer it at the point of sale, as credit card merchant fees are often a cheaper option.” 

An ‘enhanced’ version of option 2: CBA

Similarly, the Commonwealth Bank of Australia (CBA), which itself has a BNPL product (StepPay), has said it supports the government’s approach to strengthening protections for BNPL consumers under the Credit Act but added that any regulatory intervention should “strike a balance” between ensuring Australian consumers continue to benefit from BNPL while also addressing consumer harms.

As such, it said it supported a model that most closely aligned with option 2 but was “enhanced’ to also include mandatory obligations around credit reporting and tighter restrictions on credit limit increases.

The bank said it had long considered BNPL a form of credit and believed BNPL should hold an Australian Credit Licence with general obligations covering internal and external dispute resolution, hardship provisions, compensation arrangements, fee caps, and marketing.

A CBA spokesperson commented: “‘We believe BNPL can meet consumer expectations for a safe and contemporary form of short-term credit. However, a current lack of regulatory oversight is resulting in some consumers accessing credit in ways that are problematic for them. 

“CBA supports all BNPL providers being licensed under the Credit Act, with requirements to assess suitability and engage with credit bureaus. We consider this a pragmatic approach that balances the benefits BNPL has brought consumers with the need to address inadequacies in the regulatory protections currently in place.’’

Since launching its StepPay product, the major bank has reportedly seen more than 300,000 StepPay customers make over 1.5 million transactions per month. It estimated that 40 per cent of those Australians using BNPL operate more than one account.

Members of the broking industry have also responded to the BNPL regulation options paper, with the Mortgage & Finance Association of Australia (MFAA) saying it supported option 3: fully regulating the BNPL market.

Brokers have also previously flagged grievances with BNPL opacity, citing the impact on borrower credit scores that could be jeopardising their chances of securing a home loan.

[Related: BNPL stings borrowers’ credit scores, broker warns]

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