A Guide to BNPL Regulation in Australia: Licensing & Compliance

Introduction

Australia’s Buy Now, Pay Later (BNPL) industry has entered a new regulatory era, with BNPL products now officially regulated under the National Consumer Credit Protection Act 2009 (Cth). Following the passage of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth), these reforms took effect on 10 June 2025, marking a business-critical change for all BNPL providers.

This transition brings significant new compliance duties, most notably the requirement for any BNPL provider to hold an Australian Credit Licence (ACL) to engage in credit activities. This guide provides a practical overview of the new laws, explaining how to navigate key obligations such as licensing, responsible lending, and the transitional arrangements designed to help your business comply with this new framework.

Summary of Reforms: BNPL & the National Credit Act

The New Low-Cost Credit Contract Framework

The Australian Government’s reforms, finalised with the passing of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth) on 10 December 2024, introduce a new category of regulated credit known as ‘low cost credit contracts’ (LCCCs). This framework is central to how the National Consumer Credit Protection Act 2009 (Cth) will regulate the BNPL sector.

Most BNPL products are now legally classified as LCCCs, a specific type of credit contract designed to be proportionate to the lower risks associated with these financial services. A contract qualifies as a LCCC if it meets several criteria prescribed by the regulations.

To maintain LCCC status, BNPL contracts must adhere to strict fee limits. If a product’s fees exceed these caps, it no longer qualifies as an LCCC and becomes subject to the standard, more stringent requirements of the National Credit Code.

The fee caps for LCCCs are structured as follows:

Contract Type	Fee Cap Structure (First 12 Months)	Fee Cap Structure (Subsequent Years)
Contracts with only default fees	A maximum of $320 in default fees.	Reduces to $245 in default fees.
Contracts with default & other fees	A cap of $200 in other fees plus $120 in default fees.	Changes to $125 in other fees and $120 in default fees.

This LCCC framework allows providers of low cost credit to elect to comply with modified responsible lending obligations. Such an approach balances consumer protection with the unique, low-cost nature of BNPL products, ensuring that the regulatory burden is appropriate for the level of risk.

Ending Exemptions for BNPL Credit Contracts

Previously, BNPL arrangements operated outside the scope of the National Consumer Credit Protection Act 2009 (Cth). This was because BNPL providers structured their products to take advantage of specific exemptions available under the National Credit Code. As a result, providers were not required to hold an ACL or comply with responsible lending obligations.

The key exemptions that BNPL providers typically relied upon have now been specifically closed by the new legislation. These exemptions included provisions for:

• Credit provided without a specific charge for the provision of credit
• Certain types of short-term credit
• Continuing credit contracts where the only charge was a periodic or fixed fee that did not vary with the amount of credit provided

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth) amends the National Credit Code to explicitly state that these exemptions no longer apply to BNPL contracts. This change forms the core of the reforms, as it ensures that a BNPL contract is captured by the definition of a ‘credit contract’. Consequently, the provision of credit under a BNPL arrangement is now a regulated credit activity, bringing the entire BNPL industry under the national consumer credit laws effective from 10 June 2025.

The New Australian Credit Licence (ACL) Requirement

Transitional Arrangements & Key Deadlines

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth) establishes a clear timeline for compliance. From 10 June 2025, any business engaging in credit activities involving BNPL contracts must hold an ACL with the appropriate authorisations.

To facilitate this transition, the government has established specific arrangements. These allow a BNPL provider to continue offering services after the deadline, provided that by 10 June 2025, they have:

• Applied for an ACL or a variation to an existing licence
• Had their application formally accepted for lodgement by the Australian Securities and Investments Commission (ASIC)
• Become a member of the Australian Financial Complaints Authority (AFCA)

This transitional period remains in effect until ASIC makes a final decision on the licence application. Providers who fail to have an application accepted for lodgement by the deadline risk engaging in unlicensed conduct if they continue to operate.

To avoid compliance issues, important recommended dates include:

Recommended Date	Associated Body	Purpose
11 May 2025	ASIC	Suggested deadline for lodging complete Australian Credit Licence applications.
26 May 2025	AFCA	Recommended date for membership applications to ensure processing before the cut-off.

If your business already holds an ACL that authorises you to engage in credit activities for credit contracts, this authorisation will generally extend to BNPL contracts. However, a variation is necessary if you plan to engage in new credit activities, such as becoming a credit provider when you were previously only authorised for credit assistance.

Preparing Your ACL Application & Proof Documents

Submitting a complete and thorough application is crucial, as ASIC can reject incomplete submissions. A successful application demonstrates that your BNPL business is prepared to meet all obligations under the National Consumer Credit Protection Act 2009 (Cth).

Before applying for an ACL, your business must first become a member of AFCA. The ACL application itself requires several key proof documents to be submitted through ASIC’s online portal. These documents are essential for ASIC to assess your organisation’s fitness and propriety to engage in credit activities.

Key documents and information required for your application include:

Document / Information	Description
Criminal History Checks	Required for all natural person applicants or all officers and controllers of corporate applicants.
Bankruptcy Checks	Required to demonstrate a history of financial solvency for all key individuals.
Business Plan	A detailed plan outlining the BNPL product, target market, distribution channels, and financial projections.
Compliance Framework	Written policies and procedures covering responsible lending, dispute resolution, hardship, and risk management.
Governance and Resourcing	An organisational chart and details of proposed Responsible Managers, including their qualifications and experience.

ASIC assesses each application based on the information provided and may request further details during the process. The time taken for a decision depends on the quality of your application and the timeliness of your responses to any queries.

Key New BNPL Compliance Obligations

Complying with Responsible Lending Checks

Under the reforms to the National Consumer Credit Protection Act 2009 (Cth), BNPL providers are now required to comply with responsible lending obligations (RLOs). This is a significant shift, as most BNPL products were previously exempt from these requirements. The core of these obligations is to prevent consumers from entering into credit contracts that are unsuitable for their financial circumstances.

To comply, a BNPL provider must undertake several key steps before entering into a credit contract or approving a credit limit increase:

• Making reasonable inquiries about a consumer’s financial situation, as well as their requirements and objectives for seeking the credit
• Taking reasonable steps to verify the information gathered about the consumer’s financial position
• Using this information to conduct an assessment to determine if the BNPL contract would be unsuitable for the consumer

A contract is deemed unsuitable if it is likely that the consumer would be unable to meet their repayment obligations or could only do so with substantial hardship. Additionally, it is considered unsuitable if the contract does not meet the consumer’s stated requirements and objectives.

Providers are prohibited from offering a BNPL product if their assessment finds it to be unsuitable.

Comparing Standard & Modified Responsible Lending Obligations

The new regulatory framework offers providers of LCCCs a choice between two different compliance pathways for their RLOs. A BNPL provider can either adhere to the standard RLOs that apply to all traditional credit products or elect to use a scaled-down, modified RLO framework tailored for LCCCs.

To use the modified framework, a provider must make a formal written election and disclose this choice within the consumer’s credit contract.

The standard RLOs involve a comprehensive assessment of a consumer’s financial situation. In contrast, the modified RLO framework is designed to be more proportionate to the lower-risk nature of many BNPL products.

Key features of the modified RLOs include:

Feature	Description
A Scaled Approach to Inquiries	The scope of inquiries can be adjusted based on the LCCC’s nature, consumer vulnerability, and internal risk procedures.
Specific Credit Check Requirements	• Under $2,000: A “negative credit check” (for defaults, bankruptcies) is required. • $2,000 or more: A “partial credit check” (negative check plus existing credit liabilities) is necessary.
A Rebuttable Presumption	For LCCCs with a credit limit of $2,000 or less, the contract is presumed to meet the consumer’s objectives, but an assessment of their repayment ability is still required.
Mandatory Unsuitability Assessment Policy	A provider opting into modified RLOs must create and maintain a written policy detailing its unsuitability assessment process.

Hardship Procedures & Dispute Resolution

The reforms mandate that all BNPL providers must establish formal processes for assisting consumers who experience financial hardship. These procedures must comply with section 72 of the National Credit Code, which requires providers to genuinely consider any requests from consumers to vary the terms of their credit contract due to financial difficulty.

Providers must respond to these hardship applications within specified timeframes and provide their decision in writing.

In addition to internal processes, all BNPL providers are now required to become members of AFCA. This membership provides consumers with access to a free and independent external dispute resolution scheme if they are unable to resolve a complaint directly with the provider.

This requirement, along with the new hardship provisions, applies to all BNPL contracts, including those that were entered into before the new laws commenced on 10 June 2025.

A Practical BNPL Compliance Checklist

Assess Your Product & Licensing Needs

To navigate the new regulatory framework under the National Consumer Credit Protection Act 2009 (Cth), BNPL providers must first determine their product classification and licensing requirements. Begin by:

• Evaluating whether your BNPL product falls under the new definition of a “low cost credit contract” (LCCC)
• Confirming if you need to apply for a new ACL or vary an existing one to include appropriate authorisations for credit activities as a provider

Prepare & Lodge Your ACL Application

Once you’ve determined your licensing needs, you’ll need to compile a comprehensive application package:

• Gather all necessary proof documents, including:
  • A detailed business plan
  • Financial projections
  • Up-to-date criminal history and bankruptcy checks for all officers and controllers
• Ensure your application is complete and submitted to ASIC to benefit from the transitional arrangements

Establish Memberships & Dispute Resolution Frameworks

Creating robust dispute resolution mechanisms is essential for compliance:

• Become a member of AFCA to provide consumers with access to external dispute resolution
• Implement an internal dispute resolution (IDR) procedure that meets ASIC’s standards

Develop & Document Compliance Policies

Your BNPL business must have documented policies covering all regulatory obligations:

• Create a comprehensive compliance framework with written policies for all key requirements
• If using modified RLOs for LCCCs, make a formal written election and develop a detailed unsuitability assessment policy
• Establish formal hardship procedures that comply with section 72 of the National Credit Code

Implement Operational Systems & Processes

Your operational infrastructure must support compliance with the new requirements:

• Update customer onboarding to include responsible lending checks by:
  • Making reasonable inquiries about consumers’ financial situations
  • Verifying the information collected
• Configure systems to adhere to the strict fee caps applicable to LCCCs
• Revise all consumer-facing documents, including credit contracts and pre-contractual disclosures, to meet National Credit Code requirements

Ensure Strong Governance & Training

Finally, establish appropriate governance structures and knowledge base:

• Appoint responsible managers with appropriate knowledge and skills to oversee credit activities
• Conduct thorough training for all staff on their new compliance duties, particularly regarding:
  • Responsible lending practices
  • Hardship processes
  • Disclosure requirements

Comparing Pre-Reform & Post-Reform Obligations

The introduction of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (Cth) marks a fundamental shift for the BNPL industry. This transition moves the industry from a largely self-regulated space to a formal credit regime under the National Consumer Credit Protection Act 2009 (Cth), introducing significant new compliance duties for every BNPL provider.

Below is a comparison of the key obligations for providers before and after the reforms took effect on 10 June 2025:

Compliance Area	Pre-Reform Status	Post-Reform Obligation
Regulation & Licensing	Operated outside the National Consumer Credit Protection Act 2009 (Cth) via exemptions; no ACL required.	Regulated as credit contracts; all providers must hold an ACL to engage in credit activities.
Responsible Lending	No statutory RLOs; affordability checks were voluntary and guided by industry codes.	Formal RLOs are mandatory; providers must assess if a contract is unsuitable for a consumer.
Dispute Resolution	No legal requirement for formal IDR procedures; AFCA membership was voluntary for most.	Must have an ASIC-compliant IDR process and be a member of AFCA for external dispute resolution.
Hardship Assistance	No legal requirement to offer financial hardship assistance; support was inconsistent and ad-hoc.	Formal hardship procedures compliant with section 72 of the National Credit Code are required.
Disclosure Requirements	Disclosures were variable and marketing-focused, with no mandated pre-contractual information.	Mandatory pre-contractual and ongoing disclosures are required, including a credit guide.
Regulatory Oversight	ASIC’s oversight was limited to general consumer protection laws (e.g., misleading conduct).	Full regulatory oversight by ASIC, with strong enforcement powers under the credit act, including the ability to conduct audits & investigations.

Conclusion

The regulation of BNPL products under the National Consumer Credit Protection Act 2009 (Cth) requires providers to hold an ACL and adhere to a comprehensive new compliance framework. This includes new duties related to responsible lending, hardship assistance, and dispute resolution, marking a significant shift from a self-regulated industry to a formal credit regime.

Navigating these new regulatory requirements can be complex, but proactive compliance is essential for business continuity. For expert guidance on your ACL application, contact the specialist lawyers at AFSL House today. Our team can assist with implementing a tailored compliance framework to turn these regulatory challenges into strategic opportunities.

Frequently Asked Questions (FAQ)