Afterpay, Zip escape buy-now-pay-later crackdown but stricter regulation is on the way


Afterpay co-founder Nick Molnar. Source: supplied.

Afterpay and Zip Co have escaped the worst from a Senate probe into the buy-now-pay-later sector and will not be required to conduct onerous credit checks on customers.

Delivering a verdict on the industry in a final report released last Friday evening, the Standing Committee on Economics did not recommend expanding national consumer credit protections to encompass buy-now-pay-later providers.

Instead, it palmed off “what regulatory framework would be appropriate for the buy now pay later sector” for further discussion among government and corporate regulator ASIC.

The outcome is good news for Afterpay, which said in a market release on Monday it “does not expect any material impact” on its business.

Likewise for Zip Co, which welcomed the findings in a market release on Friday evening.

“Zip looks forward to continued engagement with government and ASIC on any new legislation,” the company said.

Retailers weigh in

Businesses using the platform SmartCompany spoke to offered mixed views on the outcome of the inquiry.

Nathan Huppatz, founder of, says the potential for new regulation is positive for the sector.

“We still see strong consumer demand for the payment option and this actually drives high sales. We would be concerned if the payment method became difficult to use at checkout,” Huppatz says.

“I think it can only be positive that some sort of improved regulation be implemented for the BNPL [buy-now-pay-later] sector.

“As the report suggests, self-regulation won’t ensure that all operators are running their business in the best interest of the consumer, especially given strong growth in the sector.

“Regulation will help ensure vulnerable consumers are better protected,” Huppatz adds.

Judith Treanor, founder of online retail website Temples and Markets, said she has “quite grave concerns” about the level of debt growing in Australia and over-buying more broadly caused by the accessibility of BNPL products.

If, as ASIC noted, over 40 per cent of users had incomes of under $40,000, and of this group, almost 40 per cent were either students or in part-time work, is it really responsible to facilitate the purchase of items that may not within the means of the consumer?” she asks.

Senate’s soft hand

While the committee stopped short of a crackdown as some in the market had feared, it did say the regulatory framework of the sector should “appropriately consider consumers’ personal financial situations”.

The committee also welcomed legislation currently before the House of Representatives that would extend ASIC’s product intervention powers to cover buy-now-pay-later providers, a move both Zip and Afterpay support.

There were 20 recommendations in total arising from the inquiry, which held three public hearings and received 69 public submissions.

Consumer advocates have pushed for buy-now-pay-later to be covered under the National Credit Act, claiming vulnerable Australians are falling prey to accessible online credit lines.

Paul Harrison, a senior lecturer at Deakin University and a witness who provided expert commentary during the inquiry, said he was disappointed the Senate had not thought about the issue in a more “sophisticated” manner.

“In reality, these types of products, even though they don’t look like credit products, are,” he tells SmartCompany.

Harrison says while Afterpay doesn’t charge interest, they still functionally provide credit because consumers are able to receive goods before paying for them.

“I’m disappointed they [the committee] haven’t thought in a more sophisticated way about the effect of this type of product,” he says.

ASIC figures published late last year found one-in-six-buy-now-pay-later users had either become overdrawn, delayed bill payments or borrowed additional money to meet their payments.

Zip and Afterpay have very different business models though, and ASIC examined six buy-now-pay-later providers in total, including Certegy Ezipay, Oxipay, BrightePay and Openpay.

The corporate regulator stopped short of advising the committee to bring BNPL under consumer credit protections, while the committee acknowledged there’s a regulatory gap.

“[BNPL] providers have no obligation to undertake credit checks or appropriate measures to ensure their product is appropriate for the consumer’s personal circumstances,” the committee said.

“The committee considers that this regulatory gap should be filled.”

The findings raise the prospect of a new legislative instrument to regulate BNPL products which considers financial circumstance, contains dispute resolution mechanisms, provides hardship provisions and ensures consumers are “properly informed” prior to entering agreements.

When and exactly how such regulation would come into being was not specified by the report.

Insider trading?

While the Senate committee released its report after the market closed on Friday evening, a pre-release circulated to Senators on Tuesday last week has raised eyebrows.

The corporate regulator is investigating a 7.38% slide in Afterpay shares on Wednesday morning and a 3.2% slide in Zip shares a few hours later.

The share activity has raised suspicion because there were no material market announcements prior to the falls.

ASIC commissioner Cathie Armour told estimates last week the regulator was concerned about the activity.

“The volatility at the particular time was of concern to us, so we will be following that up,” she said.

When asked about the investigation last week Afterpay did not address specific questions about its knowledge of any potential leak.

“Afterpay is not in the practice of commenting on its share price or on fluctuations in the market,” a spokesperson said.

Zip Co declined to comment when asked about the investigation.

In the hours before the release of its report on Friday, the committee published a media statement on the investigation.

It noted the “media speculation” about the share activity but said it had “no evidence” of a draft copy of the report being leaked.

“As such, there is no investigation being undertaken by the Senate into unauthorised disclosure of confidential material,” the release reads.

It did also not commit to co-operating with ASIC.

“The Committee would, of course, consider any request for assistance from the Australian Securities and Investments Commission if it is made.”

NOW READ: Afterpay, Zip under microscope: ASIC supports further buy-now-pay-later regulation

NOW READ: Businesses welcome Afterpay inquiry: Should ‘buy-now-pay-later’ be regulated?


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Iza Tamoro
Iza Tamoro
3 years ago

So where’s the write up on the stricter regulations?

3 years ago
Reply to  Iza Tamoro

There’s no regulations been drafted as yet.

3 years ago

For all you bigwig wanker’s out there, this whole BNPL scheme is to assist the average person on making purchases without the use of cash, credit card or going through a credit check. I would suggest, if (they) Afterpay etc are not already doing this to limit purchases up to a certain value until it is paid before providing the consumer with more. This way they won’t be in over their heads. Any person in their right mind would know that they cannot afford to make a payment to not make the purchase.

Having said that, people’s circumstances with finances today are always changing. Don’t even get me started on credit scores, as they are not even a true reflection of you being able to negotiate a better rate. For instance, I have encountered situations where people have discussed that they have been provided with different scores from a few different credit score providers. When asked why the difference, their reply back was ‘its the system they use’ based on the information. So basically you have been given a lower score from what happened moons ago and now people are in a better position its still a reflection and if they went to another company they give them a higher score. Again, this circulates back to the system and information they gain access to. I can’t comprehend, if your score is going to impact you then it should be across the board the same, not different from different providers.

Some morons are forgetting that not everyone has a high earning position, therefore your bills get paid on time and you most likely can afford most things. As the cost of living, rents, mortgages in major capital cities in this country is outrageous for many including foreigners. although not much different compared to other places around the world, is very hard to maintain for a lot which sees many working longer’s hours or multiple jobs.

Easy to say to people to get a position that pays well, but what about the mundane shitty jobs? someone has to still do them so don’t judge people for what they do and tell them to get a job that pays more, maybe they like what they do and at the same time, wages are stunted for many and the cost of goods and living has risen. You can’t just be talking about people who earn a significant amount, you also need to consider people in the community who can’t afford most things and on lower wages and difficult to obtain credit and they live wage by wage. How do they save for something that is needed today not in 3,6 or 12 months time? they can cut back on most, but for how much and for how long before they lose it.

You may as well regulate and do a credit check on people who produce bastards out of wedlock and expect the Govt and community to help raise it.

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