ASIC Releases New Regulatory Guidance to Support Buy Now, Pay Later Industry Reforms

The Australian Securities and Investments Commission (ASIC) has published a new regulatory guide aimed at assisting buy now, pay later (BNPL) providers in navigating their obligations ahead of new laws coming into effect on June 10, 2025. The guidance, titled Regulatory Guide 281: Low-cost credit contracts, provides critical information to help low-cost credit contract providers comply with their key responsibilities, including new, modified responsible lending obligations.

ASIC Commissioner Alan Kirkland emphasized the significance of these reforms, stating, “These reforms are an important step to improve protection for Australian consumers who use buy now, pay later products.”

The new regulatory guide follows the release of ASIC's draft guidance and Consultation Paper 382, Low-cost credit contracts, in February. In response to feedback from 16 submissions received from various stakeholders, including BNPL providers, industry associations, and consumer advocates, ASIC has made clarifications and added practical examples to the guide to ensure better understanding and compliance.

One of the key aspects of the reforms is the licensing requirement for BNPL providers. “We strongly encourage buy now, pay later providers who do not already have the appropriate credit licence to apply for one as soon as possible,” Kirkland noted. Providers who fail to submit a credit licence application for lodgement with ASIC by June 10, 2025, may find themselves operating unlawfully, engaging in unlicensed conduct.

Under the new framework, BNPL contracts that meet the definition of a low-cost credit contract will face certain obligations that differ from traditional credit contracts. For instance, providers of low-cost credit contracts will have the option to comply with modified responsible lending obligations, which are tailored to reflect the unique nature of BNPL products.

In January 2025, ASIC also released Information Sheet 285, which outlines the specific licensing requirements for entities involved in credit activities related to BNPL contracts. This is an essential resource for any provider seeking clarity on how to navigate the new regime and ensure compliance with the law.

With these important regulatory updates, ASIC continues its commitment to ensuring that the BNPL industry operates with consumer protection at the forefront. The new regulatory framework marks a significant milestone in the evolution of the BNPL sector, paving the way for a more transparent and accountable industry. Providers are urged to familiarize themselves with the updated rules to avoid any legal challenges in the future.