National Legal Aid (NLA), representing the Directors of the eight Australian State and Territory Legal Aid Commissions (LACs), welcomes the opportunity to comment on the Exposure Draft of National Consumer Credit Protection Amendment (Low Cost Credit) Regulations 2025, also known as Buy Now Pay Later Regulations.
NLA brings together the practice experience of the eight LACs that provide a wide range of services to community members experiencing disadvantage. LAC lawyers who work in consumer law have extensive experience providing specialist advice and representation to vulnerable clients experiencing financial hardship as a result of one or multiple Buy Now Pay Later (BNPL) products. Increasingly, LACs are seeing more and more consumers making use of BNPL products for day to day living expenses such as groceries, as well as essential services such as dental, school supply, and veterinary services.
As a result of the significant and increasing financial harm that BNPL products are causing consumers, NLA welcomes the draft legislation to amend the National Consumer Credit Protection Act 2009 (NCCP), noting that it will support amendments made by the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 (BNPL Act) in creating a regulatory framework for low cost credit contracts (LCCC).
NLA has some concerns regarding three elements of the Exposure Draft.
Sub reg 28HAD – Inquiries about the financial situation of the consumer
Sub regulation 28HAD(6) provides that:
The licensee must also seek to obtain information that the licensee reasonably believes to be substantially correct about the following:
(a) the income of the consumer;
(b) the expenditure of the consumer;
(c) any low cost credit contracts, small amount credit contracts or consumer leases to which the consumer is currently a party.
The explanatory statement at page 9 states that:
For example, a benchmark could be considered by a credit provider to test whether the information could be reasonably believed to be substantially correct because it is within the range expected for a person in broadly similar circumstances to the consumer. Alternatively, the comparison may indicate that the information provided may not be true. A LCCC licensee may need to regularly monitor and review benchmarks and how to use them to ensure the benchmarks remain appropriate – for example, by assessing data on defaults, complaints, and dispute resolution).
ASIC notes in RG 209.134 that “income and expense benchmarks do not provide any information about the individual consumer, and do not confirm or verify that the information that has been obtained about the consumer is true.” Treasury should ensure that licensees look to ASIC for guidance about the appropriate and adequate use of benchmarks.
Division 3 – Unsuitability assessment policies
It is likely that licensees may have unsuitability assessment policies which different components. It is difficult for a consumer to raise a complaint regarding a failure by the licensee to comply with their unsuitability assessment policy if this policy is not provided to the consumer. NLA recommends amending the draft regulation to require licensees to provide a copy of their unsuitability assessment policy when requested by a consumer. This would lead to transparency in licensee and consumer interactions and would ensure a fair dispute resolution process for consumer complaints.
Item 17, amendment to regulation 85 of the Credit Regulations by adding subregulation 85(2)
Item 17 amends regulation 85 of the Credit Regulations by adding subregulation 85(2), which sets out the requirements for what information must be contained in a first default in payment notice. These requirements should mirror the information that is provided to consumers in default under s 88(3) of the National Credit Code. Specifically, the payment notice should also include the period for remedying the default, and how to contact a financial counsellor, including the number for the credit and debt hotline. NLA notes, for example, that Credit Form 11A, which is referenced at page 12 of the explanatory statement includes the words: “If you are having financial difficulties, you can also contact a financial counsellor on 1800 007 007”.
Item 17 amends regulation 85 of the Credit Regulations by adding subregulation 85(2), which sets out the requirements for what information must be contained in a first default in payment notice. These requirements should mirror the information that is provided to consumers in default under s 88(3) of the National Credit Code. Specifically, the payment notice should also include the period for remedying the default, and how to contact a financial counsellor, including the number for the credit and debt hotline. NLA notes, for example, that Credit Form 11A, which is referenced at page 12 of the explanatory statement includes the words: “If you are having financial difficulties, you can also contact a financial counsellor on 1800 007 007”.
Consideration should be given to including this statement or similar as part of the required information to be including in a first default in payment notice.