Buy now, pay later platforms have welcomed a final report into the credit and financial services sector that was handed down late Friday afternoon.
The senate inquiry made a number for recommendations to companies like Afterpay, Zip Pay and FlexiGroup, but none of those recommendations included expensive credit checks for new customers.
During the inquiry, which was tasked with examining credit and financial products targeted at Australians at risk of financial hardship, several groups were lobbying for tighter regulations that classify buy now, pay later institutions as lenders.
The senate report follows a report from ASIC, handed down late last year, that claimed there needed to be tighter regulations around these financial institutions as one in six users of them are facing financial hardship.
One of the recommendations handed down by the senate was for the government and ASIC consider what “regulatory framework would be appropriate for the new buy now pay later sector”.
It also recommended that some of this regulation should ensure before credit is extended providers consider the consumers’ personal financial situation.
Other recommendations included that consumers have access to internal and external dispute resolution mechanisms; providers offer hardship provisions; products are affordable and offer value for money and consumers and properly informed, prior to entering into agreements about their terms and conditions.
The senate report also said the industry needs to develop a code of practice.
It also recommended that ASIC review how financial products and services, including credit, are advertised and issue and updated regulatory guide to how credit products interact with consumers in an online environment.
Responses from the industry
Zip Pay, Afterpay and FlexiGroup all say they welcome the recommendations made by the senate inquiry.
Zip Pay CEO Larry Diamond said, “This report is an important step in establishing a balanced regulatory framework. Zip looks forward to continued engagement with government and ASIC on any new legislation, and other industry participants to form an industry code of practice.
“We fully support regulation that strengthens community confidence in the BNPL sector, fosters Australian fintech innovation and protects consumers from harm”
Anthony Eisen, co-founder of Afterpay said, “Afterpay supports the recommendations relevant to the buy now pay later sector and believes the recommendations are sensible, appropriate and stand to provide additional protections for vulnerable Australians.
“The senate committee process highlighted important fundamental differences between the buy now pay later sector and traditional credit products and the need for a separate regulatory framework.
“We look forward to working with ASIC, the government, consumers and industry on a suitable regulatory framework and to achieve the best possible outcomes for our customers, including through continued innovation and improved data sharing.”
Rebecca James, CEO at Flexi Pay said, “In the case of consumer leasing, we have early adopted many of the government panel recommendations.
“In the fast-growing buy now pay later space, we continue to believe self-regulation is appropriate and could rapidly (and much faster than the legislature) lead to better outcomes for BNPL customers at risk of financial hardship. This is something we will continue to explore with our industry bodies and our peers.”
Last week, Afterpay, Zip Pay and FlexiGroup’s stock price all plummeted within 25 minutes on Wednesday morning two days before the report was released.
ASIC is still looking into why this happened with some commentators suggesting a political mole is behind leaking the news to shareholders.
However the committee released a statement last week saying it has “no evidence to suggest the report was disclosed to external parties. As such, there is no investigation being undertaken by the senate into unauthorised disclosure of confidential material.”