Buy now, pay later providers in Australia have been told to apply for credit licences ahead of new laws coming into effect in June.
Australia has seen take up of BNPL products from firms such as Afterpay, Klarna and Zip soar in recent years, with around 40% of people using them in the first half of last year, according to a Finder survey.
However, with most of these products not covered by the National Consumer Credit Act, last summer the government moved to amend the act so that providers are required to hold a credit licence and comply with existing laws about checks.
The legislation also established a new category of ‘low‑cost credit’ under the Act "to reflect the lower risk and cost of BNPL compared with other regulated forms of credit".
With the act now amended, the Australian Securities and Investment Commission (Asic) has told BNPL firm that they need to take action.
Firms need to apply for a credit licence, have the application for lodgement accepted by Asic, and become a member of the Australian Financial Complaints Authority by 10 June.
The regulator is urging providers to apply early - by 11 May - because it may take some time to obtain additional information.