Australia's buy now, pay later (BNPL) industry is facing tough new laws aimed at better protecting the millions of people who use the products.
The new regulations are expected to be announced by Assistant Treasurer Stephen Jones today and will make it harder for Australians to access BNPL products with the introduction of more checks.
About seven million people use BNPL products, such as Afterpay and Zip. These allow shoppers to buy items immediately and pay them off in installments over time.
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But there have been concerns this could lead to financial stress if consumers take on too much debt or can't keep up with payments and are charged interest fees.
Under the changes, BNPL products will be classified as credit products, requiring operators to adhere to the National Consumer Credit Protection Act and hold an Australian credit licence.
BNPL operators will have to ensure that customers can afford to use the products before they are offered. Fees for missed payments will be capped and disclosures offered so people know what they are signing up for.
BNPL isn't currently regulated in the same way as credit cards, and the vast majority of its users are aged under 35.
The federal government is concerned some of the seven million BNPL customers hold multiple accounts, leaving them vulnerable to spiralling debt.
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It is estimated that there are almost 20 BNPL services in the Australian market offered by more than a dozen providers.
Late last year, the government flagged improved regulations of the BNPL industry and called for feedback from the public and operators.
Jones is set to announce the reforms in a speech at the Responsible Lending and Borrowing Summit today.
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