The government of Australia has opened a round of consultations for creating regulations that will control buy now, pay later (BNPL) solutions.
The move is based on three options recommended by the government’s Treasury department. People were asked to send their submissions through the process.
The first option includes the development of stricter industry self-regulation and a new requirement for ‘affordability test’.
The second option aims to bring portions of BNPL products into the Credit Act, including licensing providers and others.
With the third option, the government seeks to fully bring BNPL into the Credit Act similar to credit cards and other conventional credit tools.
According to the Treasury department, active BNPL accounts increased from five to seven million in the last financial year, with majority of the accounts being owned by consumers between the age group of 18 and 34.
Australia assistant treasurer and minister for financial services Stephen Jones said in a statement: “While the industry’s Code of Practice has worked well to date, the sector is maturing rapidly.”
He added: “But there is a regulatory gap that can leave some vulnerable groups in over their head.”
Currently, nearly 20 BNPL services, such as Afterpay, Zip Pay and Klarna, are conducting their operations in Australia, according to The Sydney Morning Herald.
These outfits enable consumers to buy products and pay for those in a number of equal instalments later.
They make money from fees received from sellers and late charges levied on shoppers who fail to payment the instalment.