Buy Now, Pay Later Code of Practice

The Australian Financial Industry Association (AFIA) has released for consultation a draft Code of Practice for Buy Now, Pay Later (BNPL) providers who are members of AFIA.

This Code is intended to impose standards on members that are above those required by the law or regulation.

It is proposed that the Code will be effective from 1 July 2020.

What is a Buy Now Pay Later Product or Service?
The Code applies to:

  • a shorter-term product or service for the purchase of goods or services where the purchase price is repaid in equal instalments. Consumers pay no extra charges if they pay within a specified period; or
  • a product or service that is a continuing credit contract for up to $30,000 for the purchase of goods or services. Some contracts require a minimum periodic repayment; others involve a fixed repayment plan for each purchase.
    Multiple advances of credit may be available. Fees and charges are limited to $200 in the first year and $125 in each subsequent year; and
  • there is a contract between the customer and the Buy Now Pay Later Provider, a contract between the consumer and the merchant or retailer, and a contract between the Buy Now Pay Later Provider and the merchant or retailer; and
  • the customer buys and receives goods or services from a merchant; the Buy Now Pay Later Provider pays the merchant or retailer for the purchase (minus merchant fees); and the customer repays the Buy Now Pay Later Provider for their purchase.

Dealing with customers
Standards include:

  • Members agree to assess customers to ensure their product or service will be suitable for customers prior to providing it for every new Transaction Amount. They will take into account customers’ characteristics based on the common aspects of their objectives, financial situation and needs;
  • They will only provide products or services to customers who they assess as having the ability to pay for the product or service over time;
  • Once approved for products or services, members will ensure there are safeguards so the product or service remains suitable for the customer.
  • They will:
    (a) Cap fees and keep them fair;
    (b) Prevent a customer spending more through our product or service if their payments are not up to date ;
    (c) Adjust a customer’s future spending limit based on their repayment history; and
    (d) Proactively provide Financial Hardship assistance.

The Code deals with complaints and dispute resolution.

The Code does not deal with fees charged to merchants and their ability to pass on fees to customers.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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