BNPL Becomes Regulated Credit: ACL Required from 10 June 2025

What the BNPL reforms do

The reforms, enacted through the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, fundamentally change the regulatory landscape for Buy Now Pay Later (BNPL) services. From 10 June 2025, BNPL contracts will be classified as ‘low cost credit contracts’ (LCCC) and will be regulated under the National Consumer Credit Protection Act 2009 (NCCP) and the National Credit Code. This means BNPL providers are now subject to consumer credit law. NCCP Act credit licence overview

A key requirement of the reforms is that anyone engaging in credit activities involving BNPL must hold an Australian Credit Licence (ACL) with the necessary authorisations. This licensing regime ensures providers meet certain standards and are accountable for their conduct. Furthermore, BNPL providers must also become members of the Australian Financial Complaints Authority (AFCA) if they are not already.

The operational details and modified obligations for BNPL providers will be outlined in the forthcoming Detailed BNPL Regulations 2025. These regulations will provide specific guidance on how the NCCP and National Credit Code apply to BNPL services.

Modified responsible lending obligations

Credit licensees offering Buy Now Pay Later (BNPL) services will face modified responsible lending obligations from 10 June 2025. A licensee can elect to apply these modified obligations to low-cost credit contracts, recognising the lower risk profile typically associated with this type of lending. This option allows for a less detailed inquiry-and-verification process, scaled to the specific risks of BNPL credit. NCCP responsible lending obligations apply if a licensee chooses not to adopt the modified approach.

If a licensee opts in to modified RLOs, they must establish a written ‘unsuitability assessment policy’ that meets prescribed minimum standards. This policy guides the assessment process and ensures appropriate safeguards are in place. The modified RLOs are designed to balance consumer protection with the operational realities of the BNPL sector.

Credit limit increases are subject to assessment requirements. These requirements are scaled, with first-time customers and increases above a certain threshold triggering more rigorous checks. This ensures that even when credit limits are adjusted, appropriate consideration is given to the consumer's ability to repay.

Transitional arrangements

Existing Buy Now Pay Later (BNPL) providers have transitional arrangements to ensure continuity of service. Providers who applied for an Australian Credit Licence (ACL) or a variation of an existing ACL before 10 June 2025 can continue to provide BNPL services while their application is pending. This allows ongoing operation while the licensing process is finalised.

ASIC has published guidance to assist BNPL providers with the new regulatory framework. This guidance, available in RG 281 and an updated RG 209, outlines licensing pathways and details responsible lending expectations. Providers must also adhere to marketing and disclosure rules, including the use of key facts sheets where required by regulations. Design and distribution obligations RG 274 apply to BNPL as a financial product.

The National Credit Code’s hardship variation provisions apply to BNPL contracts in the same way as they apply to traditional credit products. This ensures consumers experiencing financial difficulty have access to appropriate support and flexibility regarding their BNPL repayments.

Impact on industry and consumers

The regulatory changes mean major BNPL providers (Afterpay, Zip, Klarna, Humm, Latitude) are now subject to the same rules as personal-loan and credit-card providers. This includes obligations relating to credit reporting, where BNPL provider activity can now be reported to credit bureaux. Consumers experiencing financial difficulty, or who are hardship customers, will also benefit from protections outlined in the National Consumer Credit Protection Act (NCC) sections 72-77, including the ability to provide statutory hardship notices and request loan variations. ASIC RG 271 internal dispute resolution provides guidance on internal dispute resolution processes.

Consumers will also have increased avenues for resolving disputes. Once a BNPL provider joins the Australian Financial Complaints Authority (AFCA), consumer claims can be heard within AFCA’s monetary jurisdiction, up to $1.263 million. This provides a pathway for redress previously unavailable.

ASIC retains the ability to intervene. Should BNPL products cause significant consumer detriment, ASIC’s product intervention power can be used to address those concerns and protect consumers.