Confusion around what sort of borrower checking is required to meet obligations under the Credit Act remains widespread, say lending experts who are calling for the law to be clarified before the buy now, pay later sector is brought under those rules for the first time., urged the strictest model for regulation. This would include subjecting those operators to full responsible lending checks under the National Consumer Credit Protection Act.
Buy now, pay later providers argue a $500 loan paid back in six weeks requires a less detailed check than a $5000 revolving credit card limit – which should be less than a $500,000 mortgage.Afterpay is wondering whether it could confirm a digital credit score is above a threshold to allow a customer onto the platform; if fuller income and expense checks are required, it is keen for the “open banking” customer data sharing regime to be used to enable ultra-fast checking.
“Although some commentators have suggested that the [law] already takes a principles-based approach and applies the concept of scalability in relation to affordability assessments, the application of the NCCP Act would inevitably increase the costs of compliance,” it said. “More thought will be needed on whether there should be different modifications for different types of buy now, pay later models, according to the bespoke model and relative levels of harm that they do or may cause,” the regulator wrote in its submission.
Larger players, such as Brighte, which provide large interest-free loans for solar panels, have to conduct a more comprehensive check, similar to a credit card or personal loan. Afterpay, and the Australian Retailers Association, want the government to adopt a strengthened code as the regulatory model.