The Law Handbook 2024

Chapter 5.7: Understanding credit and finance 425 Buy-now-pay-later and similar arrangements The consumer protections under the NCCP Act and the NCC do not generally apply to buy-now-pay- later ( BNPL ) and similar arrangements (e.g. wage- advance products). For example: • Where a BNPL arrangement does not charge con- sumers for providing the credit, the arrangement is not regarded as being ‘credit’ under the NCC. • A BNPL arrangement is not regulated if: – the credit is for a term of 62 days or less, and – the fees or charges do not exceed five per cent of the amount of the credit, and – the interest charges do not exceed an amount equal to 24 per cent per annum (s 6(1) NCC). • BNPL arrangements styled as ‘continuing credit contracts’ are not regulated where they only include charges for credit that amount to an upfront fee (e.g. an establishment fee) or a periodic fee (e.g. an account-keeping fee) that is fixed, does not vary according to the amount of credit that is provided, and is less than specified amounts (s 6(5) NCC; reg 51 NCCP Regulations). In November 2022, the Federal Government published an options paper seeking feedback on future regulatory framework for BNPL arrangements under the NCCP Act. It is expected that legislation will be enacted in 2024. Which credit providers must comply with the NCCP Act? Persons engaging in ‘credit activities’ Chapter 2 of the NCCP Act generally requires all persons engaging in ‘credit activities’ to hold an Australian Credit Licence. In practice, this means that most credit providers, finance brokers and lease providers have to hold an Australian Credit Licence. You can check if a business is licensed to engage in credit activities by visiting www.asic.gov.au and searching the professional register. ‘Credit activity’ is defined comprehensively in section 6 of the NCCP Act. In brief, a person is engaged in a credit activity if the person: • is a credit provider under a credit contract regu- lated by the NCC; • carries on a business of providing regulated credit; • provides credit assistance; • acts as an intermediary; • is a lessor under a regulated consumer lease; • carries on a business of providing regulated consumer leases; • is a mortgagee under a regulated mortgage; or • is a beneficiary of a regulated guarantee. From 1 July 2021, certain debt management services are considered to be a ‘credit activity’ where the activity is in relation to consumer credit contracts and a fee, charge or other amount is paid or payable by, or on behalf of, the consumer in relation to the service (see National Consumer Credit Protection Amendment (Debt Management Services) Regulations 2021 (Cth)). Debt management services involve suggesting/ helping a consumer to: • apply for a change to a credit contract for which the consumer is a debtor; • apply for a postponement of enforcement proceedings; • make a complaint or claim to a credit provider, AFCA, ASIC, or the Information Commissioner; • apply for a change to information collected by a credit-reporting body about a credit contract for which the consumer is a debtor. ASIC’s ‘Information Sheet 254’ (available at https://download.asic.gov.au/media/iqbiovhu/ info254-published-5-may-2021.pdf) provides more information about credit licensing and debt management services. Lawyers are generally exempt fromcredit licensing, unless they hold out or advertise to consumers that they provide debt management services. What is ‘credit assistance’? Section 8 of the NCCP Act defines the following activities as credit assistance: • suggesting that the consumer apply for a particu- lar credit contract with a particular credit provider; • suggesting that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider; • suggesting that the consumer remain in a particular credit contract with a particular credit provider; • assisting the consumer to apply for a particular credit contract with a particular credit provider; • assisting the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider;