Australians who sign up to a buy now, pay later (BNPL) service like Afterpay, Klarna or Zip Pay from today may find themselves with a lower spending limit than those who joined yesterday.
That’s because from today, BNPL services will be regulated like any other credit product in Australia (such as credit cards), forcing BNPL giants to change the way they do business.
The new regulations are designed to safeguard the millions of Australians who use BNPL services from potentially harmful credit contracts, according to the Australian Securities and Investments Commission (ASIC).
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Research from August 2024 showed that two in five Aussies had used a BNPL service in the previous six months, with Gen Z and Gen Y most likely to use them.
Here’s everything you need to know about the new regulations.
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What are the new laws for buy now, pay later services in Australia?
From Tuesday, June 10, BNPL services will be required hold a credit licence and comply with existing credit laws.
Under the new regulations, they will have to ask more questions and enforce stricter policies when assessing new borrowers in a bid to prevent financial strain.
New customers will now have to answer questions about their finances and undergo a credit check before they are allowed to borrow money and their initial spending limit may be affected by their answers and credit score.
For example, Afterpay used to offer all new customers a $600 starting limit but from today, borrowers may be given a smaller starting limit if they have a lower credit score.
Customers with existing BNPL accounts will not be required to undergo a credit check, but BNPL services may affect all users’ credit scores.
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What happens if I miss a payment under the new buy now, pay later rules?
Because BNPL services are now regulated like any other credit product, missed repayments may have a negative impact on borrowers’ credit scores.
Missed or late BNPL repayments may appear on their credit reports, making it more difficult for them to take out future loans.
This could cause issues down the road, especially when it comes to securing loans for major purchases like a home.
Is buy now, pay later bad for your credit score?
Not necessarily.
While missed or late repayments could negatively affect a person’s credit score, consistent, on-time payments may have a positive impact.
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
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