The Australia Finance Industry Association (AFIA)’s Code of Practice for the Buy Now Pay Later sector comes into effect on 1 March 2021.
The Code is focused on protecting customers using Buy Now Pay Later (BNPL) products and services; it includes nine commitments that signatories make directly to the people that use their products and services.
The BNPL Code is a proactive response to concerns highlighted by inquiries held over the past couple of years by the Senate and ASIC and the call for the industry to self-regulate.
There has been significant growth in the sector due to a number of supply and demand factors, so the BNPL Code is an important addition going above and beyond the law, setting best practices of conduct and consumer protections, and promoting competition and innovation.
The BNPL Code is about the relationship between the customer and the BNPL provider. In addition to the BNPL Code, there are other reviews contemplating issues important to ARA members, including payments rules and merchant surcharging.
There are elements in the BNPL Code that focus on the relationship between the providers and their retailers. Each BNPL Code Compliant Member will be required to have each of its merchant and retail partners meet minimum standards. This addresses the criticism aimed at BNPL providers and retailers that they need to ensure customers know what they are getting, and that the communication about BNPL products and services is clear.
Many of the global leaders in BNPL are Australian, and the BNPL Code is a world first. It has taken two years to bring it to fruition and has involved broad consultation and has evolved to include new developments throughout this time. AFIA has worked with its BNPL members and key stakeholders, such as ASIC and consumer advocates, to develop the Code.
AFIA and the BNPL sector believe the growth and diversity of the products and services enhances consumer choice; it brings life to the concept that innovation and competition is for the ‘everyday person’, and this can be achieved while codifying strong consumer protections. The BNPL sector supports economic activity, and this has been particularly critical for our recovery from the COVID-19 crisis.
All BNPL Code Compliant Members will be required to conduct suitability assessments before a potential customer can make a purchase and there will be additional ‘in life’ checks to prevent customers extending themselves further, for instance, if they are showing signs of difficulty in making repayments. There is also a cap on the fees that can be charged by BNPL providers to customers.
The Code also requires BNPL providers to be members of the Australian Financial Complaints Authority (AFCA), so customers that have a complaint that isn’t addressed satisfactorily by their provider, can take their dispute to this independent body.
In addition, the BNPL Code is overseen by a Code Compliance Committee, including accreditation of members. The Committee is not part of AFIA and includes an independent Chair, representative with industry and legal experience, and a consumer representative who has been nominated by the consumer advocates’ representative body, the Consumers’ Federation of Australia. This Committee has monitoring powers and also a broad range of sanctions available to them if there are breaches of the Code – up to and including publicly naming members who have had a significant breach.
BNPL providers must comply with a range of legal obligations, including requirements administered by ASIC, but also other regulatory authorities.
AFIA sees self-regulation as an important part of the regulatory framework – the key advantage of the BNPL Code is its ability to quickly adapt and evolve as an innovative sector matures. The Code contains a two year review period, but AFIA will be keeping an eye on domestic and international developments to ensure the Code remains best practice.
Further details of the BNPL Code, its governance structure, Code Compliance Committee members, accreditation process and relevant complaints processes can be found on the AFIA website.