SYDNEY – The Australian government said on Monday it will introduce laws that consider buy-now-pay-later (BNPL) services as a credit product in a bid to protect consumers in a largely unregulated industry.

BNPL companies typically offer on-the-spot interest-free short-term loans with minimal credit checks that spread payments and are largely used by cash-strapped people taking debt, sometimes more than they can afford to buy.

“They are very popular, but we need to make sure that we can manage them appropriately,” Treasurer Jim Chalmers told ABC television.

“Best way to do that is to legislate, to regulate as a credit product, so that we can manage some of the risks.”

The absence of interest charges has exempted them from consumer credit regulation, and the sector has seen its business surge during an online shopping frenzy spurred by Covid-19 stimulus payments and ultra-low interest rates.

But concerns about repayment have been rising as Australia battles high inflation, which now sits at near 30-year highs.

The services will be required to have a credit licence, make allowances for financial hardship and minimum standards for conduct that could subject them to the same laws as credit card providers, Financial Services Minister Stephen Jones will say in a speech on Monday, local media reported.

Australia, home to about a dozen listed BNPL providers, has about seven million active accounts that resulted in A$16 billion (S$14 billion) of transactions in 2021 to 2022, up 37 per cent, data showed.

Australia’s biggest BNPL company Afterpay, bought in 2022 by Twitter founder Jack Dorsey’s Block, has argued against tough regulations, while PayPal Holdings has said it wants BNPL loans to be subject to consumer protection law.

The government will unveil the draft legislation for consultation in late 2023 and the Bill will be introduced into Parliament by the end of 2023, media reported. REUTERS