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Posted: 2022-11-20 13:00:55

An estimated 7 million "buy now pay later" users could soon see new laws introduced by the federal government that aims to better protect them against financial abuse.

A new Treasury paper released by Financial Service Minister Stephen Jones on Monday suggested buy now pay later players could soon be subject to the same laws as credit card providers, as "unaffordable or inappropriate lending practices are contributing to financial stress and hardship, and other types of consumer harm".

The paper said there were 7 million active buy now pay later accounts in the 2021-22 financial year resulting in $16 billion in transactions, an increase of almost 37 per cent on the previous financial year.

Mr Jones told ABC News that while these products — offered by well-known players like Afterpay, Zip Pay, humm, and Klarna — can be an easy alternative avenue of credit, often vulnerable and/or younger consumers were at risk.

"A lot of Australians are racking up unaffordable debts," Mr Jones said.

"And what we know is lots of people have lots and lots and lots of buy now pay later accounts.

A middle-aged white man in a navy suit and a red tie presses his lips together.
Stephen Jones says "it makes sense to have some credit controls in place" on buy now pay later players. (ABC News: Matt Roberts)

He said most of these accounts were held by people aged 18 to 35.

"It seems to us that it makes sense to have some credit controls in place."

Consumer groups including Financial Counselling Australia and the Consumer Action Law Centre have long argued that buy now pay later providers should adhere to the same responsible lending laws as other providers of credit.

Despite that, a Senate inquiry into fin tech held two years ago under the previous government, suggested not to regulate them and instead have an industry code that players could voluntarily adhere to if they wished.

'Poor complaints handling'

But the Treasury paper makes it clear self regulation, without some controls, is no longer an option.

It raises a range of issues, noting there's been reports of "poor complaints handling processes" and that "the lack of hardship assistance for consumers leads to delayed or unsatisfactory remediation".

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