This fact sheet is for information only. You should get professional advice about your personal situation.
Main ideas
• Buy Now Pay Later (BNPL) can easily lead to a debt trap. Be very careful.
• From 11 December 2024, Buy Now Pay Later providers must comply with responsible lending laws and offer hardship if your situation changes.
• Further laws that modify the responsible lending obligations of Buy Now Pay Later providers are expected to come into effect no later than 11 June 2025.
• Most Buy Now Pay Later services have signed up to a code of practice, which does give you some protections.
• Free financial counsellors can help if you have problems with Buy Now Pay Later.
In this fact sheet:
Buy Now Pay Later sounds good, but …
Buy Now Pay Later can get you into a debt trap
Buy Now Pay Later is now regulated like other credit
- Responsible lending obligations
- Protection if you are in financial difficulty
Check who is getting your personal information
Keeping Buy Now Pay Later under control
Buy Now Pay Later sounds good, but …
Buy Now Pay Later (BNPL) services market themselves as quick and easy – get what you want now, and pay it off later.
You pay for the goods in instalments (a bit like lay-by but you get the goods right now). Instead of charging interest, BNPL services usually:
- charge the shop a fee for using their service
- charge you late fees if you don’t pay your instalments on time.
Shops need to cover the BNPL fees, and this can increase their prices for all customers. Always ask about the cash price of any items before agreeing to pay by BNPL. Compare prices with other retailers to check you are not paying hidden BNPL costs.
If you want to return an item to a shop, make sure the shop will process the return to the BNPL service. You don’t want to be caught in the middle – the BNPL may expect instalments to pay for items you no longer have.
Using a BNPL service can be cheaper than a credit card or other forms of credit, as long as you pay the instalments on time. Some people who can’t get a loan or credit card may be able to access BNPL.
BNPL can affect your credit report, depending on the lender. It may affect your ability to get other loans. Applying for BNPL may show up as an enquiry on your credit report. Repayment history information may be reported. If you miss repayments, you may get a default on your credit report, impacting your credit rating.
Buy Now Pay Later can get you into a debt trap
A debt trap is when you need to keep on borrowing money to pay back the last loan, and you never get out of debt. BNPL is debt that needs to be paid. Every time you use the service, you are adding to your total debt.
This is a problem if you could not afford the item in the first place. Buying with BNPL does not make it more affordable, it just spreads out how long you have to pay. And it can leave you with late fees adding up.
If you have multiple BNPL loans because you have bought multiple items, or you’ve signed up with more than one company, trying to work out who you need to pay, and when you need to pay them, can be very difficult.
It is easy to fall into a debt trap if you don’t have the money to pay the next instalment. If the payment instalment is due just before your pay day, you may have no money left in your account. You will then be charged late fees by the BNPL service and dishonour fees by your bank.
This can quickly spiral out of control, making it harder to pay your other debts and regular expenses (like food and petrol).
If you start paying your instalments with your credit card instead of a debit/savings account, you may pay credit card interest and charges on top of your instalments.
Buy Now Pay Later is now regulated like other credit
From 11 December 2024, BNPL companies must now follow the same laws as companies who provide other forms of credit, like credit cards. They are now within the current laws because they meet the definition of a Low Cost Credit Contract (LCCC) under the National Consumer Credit Protection Act 2009 (NCCP Act).
This means that if you are a consumer of a BNPL product, you now have some important protections including:
- You have the right to ask for financial hardship assistance. The BNPL provider must respond to your request within 21 days (or if they ask you for more information, then 21 days after you provide that information).
- The BNPL provider must comply with existing responsible lending obligations under the NCCP Act.
- The BNPL provider must be a member of the Australian Financial Complaints Authority (a free complaints service to go to if a problem comes up). Read our fact sheet about Financial Complaints to AFCA.
- The BNPL provider will provide clear information about when your payments are deducted and all fees they charge.
- You will have a right to all documents about your profile and transactions.
- The BNPL provider will act efficiently, honestly and fairly.
Responsible lending obligations
The existing responsible lending obligations under the NCCP Act applies to BNPL products.
These require BNPL providers to conduct the following suitability assessment:
- ask reasonable questions about your needs and goals
- ask reasonable questions about your financial circumstances
- take reasonable steps to verify the information you gave about your financial circumstances is correct.
What is ‘reasonable’ depends on many different factors, including the type of loan, and your situation. Read the Australian Securities and Investments Commission’s (ASIC) Regulatory Guide 209 for a description of what is reasonable.
Read our fact sheet about Responsible Lending.
New laws will come into effect no later than 11 June 2025 that will allow BNPL providers to opt in to a new, ‘modified’ responsible lending framework. This will ease some of the suitability assessment requirements on BNPL providers and allow them to reduce the intensity of the assessment depending on the presence of certain risk factors.
ASIC is also expected to release a new Regulatory Guide to address what is ‘reasonable’ in the context of BNPL products.
Protection if you are in financial difficulty
Unexpected things happen. You might lose your job, get sick, or your car could break down.
From 11 December 2024, BNPL providers must now work with you if you are in financial hardship.
BNPL products for personal use are now regulated as consumer credit. This means the National Credit Code generally applies, and your BNPL provider must consider your request for a hardship variation.
Read our fact sheet about Financial Hardship.
Defaulting on BNPL services may affect your credit rating. Some BNPL schemes will list on your credit file, and that makes it harder to get credit from other lenders.
Check who is getting your personal information
BNPL services store your personal information (like your name, date of birth, contact number). They also store a record of your purchases. This information is very valuable to other businesses and for the BNPL service’s own marketing.
Check if the BNPL contract gives the company the right to sell your personal information to other businesses, and to market directly to you.
Keeping Buy Now Pay Later under control
BNPL can let you take an item home straight away. But be very careful about making impulse purchases. Always have a clear plan for paying the debt back.
Make sure you will have enough money left each pay day to meet the BNPL instalment plus all your other bills – including other debt payments.
Before signing up to a BNPL service, ask:
- Have they signed up to the Buy Now Pay Later Code of Practice?
- What happens to my personal information (data)? What is the BNPL service’s privacy policy?
- What goes onto my credit report?
- What other debts do I already have?
- What other repayments do I need to make with my pay, including other BNPL payments?
- Are there hidden costs? What if I can’t afford a payment?
- What if I return the goods?
- What if I want to complain?
Before buying something using BNPL consider:
- How many payments do I need to make and how much is each payment?
- Will I be able to make all payments on time?
- How much are the fees if I miss repayments?
- When are the payments deducted from my account? (Line up your purchases with your pay day.)
- Am I being charged extra for the items? Shop around. Am I paying more because I’m using a BNPL service?
The Buy Now Pay Later Code of Practice
The BNPL Code of Practice is a voluntary code. Most of the big BNPL providers have signed onto the Code. You can check which companies have signed the Code of Practice through AFIA’s website
From 11 December 2024, some of the most important provisions of the BNPL Code of Practice have been superseded by the NCCP Act (such as provisions about financial hardship and assessing affordability). These provisions now apply to all BNPL providers, regardless of whether they are signed on to the BNPL Code of Practice.
However, the BNPL Code of Practice continues to provide some specific protections for consumers when dealing with a BNPL provider who has signed on to the Code. A copy of the Code is available on the AFIA website. Some of the additional protections include:
- If you miss a payment, the BNPL service must contact you before they charge late fees.
- BNPL services will not be used for unlawful unsolicited sales.
- While the BNPL provider is considering how to answer your request for financial hardship assistance, your account must be put on hold, late fees frozen, and no default listing can be listed on your credit file.
- Your debt will not be sold to a debt collector if you are in a financial hardship arrangement.
- BNPL providers will never commence bankruptcy proceedings against you.
- Late fees must be fair, reasonable and capped.
If you think a BNPL provider has breached their obligations under the BNPL Code of Practice, you can complain to the BNPL Code Compliance Committee. The Code Compliance Committee is an independent committee responsible for the administration and enforcement of the Code of Practice. This includes monitoring and investigating a BNPL provider’s compliance, and imposing sanctions for non-compliance. It does not provide a dispute resolution service in relation to individual complaints
Complaining about a Buy Now Pay Later service
If you have a problem with a BNPL service, in the first instance complain directly to the company. For most complaints the BNPL provider should respond within 30 days. If you are requesting a financial hardship variation, they should respond within 21 days.
If you are not happy with the response from the company, or they have not responded to your hardship request within 21 days or other complaint within 30 days, you can complain to the Australian Financial Complaints Authority (AFCA).
As of 11 December 2024, BNPL service must be members of AFCA.
AFCA can consider breaches of the law, the BNPL Code of Practice, and best business practices generally. Read our fact sheet about Financial Complaints to AFCA.
If a BNPL provider has breached their obligations or has not acted fairly towards you, get legal advice by calling our Credit & Debt Legal Advice line on 1800 844 949.
For problems involving faulty or returned goods, talk to NSW Fair Trading.
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Last updated: January 2025
