What would an increase in regulation mean for Afterpay?

There has been a growing wave of talk about Buy Now Pay Later (BNPL) regulation over the past year.

With increasing concern over the longstanding impact of BNPL debt on Aussie bank accounts and future borrowing ability, pressure is being placed on Australia’s major buy now pay later providers to begin regulating their practices. 

What would Afterpay regulation look like?

If you’ve been using Afterpay, Paypal Pay in 4, Zip Pay and more to stay on top of the rising cost of living, you might be wondering what difference stricter regulation would actually make on your payments.

After months of speculation, we’ve got a real idea courtesy of Afterpay’s international head of public policy, Michael Saadat in the Sydney Morning Herald. While he argues that credit checks are not a solution to the problem completely, “[Afterpay] recognise that credit checks have a role to play.” These could potentially apply to customers with borrowing limits upwards of $1,000.

“If we’re designing a framework that has consumers in mind, I think consumers would say that it really is disproportionate to be asking for their income and expenses when they’re being provided with an Afterpay product that gives you a $600 up-front spending limit,” Saadat said.

Currently, customers receive an initial $600 credit limit via Afterpay, which can increase to up to $3,000 after payments are made consistently and on-time. 

Afterpay also supports the creation of a BNPL Code of Practice by which Buy Now Pay Later products can operate, rather than operating by the same regulations as credit cards. 

Other providers and banks support alternative propositions, which might see BNPL licensed under the Credit Act either wholly or partly, or subject to stronger self-regulation. Each option has both supporters and detractors throughout the financial sector.

The government will continue its consultations on how to regulate Buy Now Pay Later while deciding how best to forge forwards.

If you’ve got a few extra expenses right now and are finding yourself drawn to BNPL, find out which ones took out our Best in Buy Now Pay Later. Otherwise, if interest-free credit cards are more your scene, start comparing below.