Australia has been informed by PayPal that it supports the buy-now-pay-later rule.
Australia (Reuters): PayPal Holdings Inc (NASDAQ:PYPL) demanded that buy-now-pay-later (BNPL) loans be covered by consumer protection laws in a statement to the Australian government, adding a strong industry voice in favour of regulation.
The American company, which offers BNPL loans alongside its primary money transfer service, claimed that while it already has safeguards in place to prevent consumers from taking on excessive debt, the industry as a whole needs to be subject to regulation to preserve “consumer and industry certainty and competitive neutrality.”
The report, which the government made public on Thursday as part of a probe into BNPL regulation, provides the most thorough explanation to date of PayPal’s stance on the extent of government control of the industry. Numerous additional lenders of BNPLs said in their presentations that they favour minimum or self-regulation.
PayPal, a $88 billion company, stated in the submission, which was signed by its Australia General Manager Andrew Toon, that it supported “a tailored, proportionate, and thoughtful regulatory framework for the BNPL sector via the National Consumer Credit Protection Act to achieve the Government’s objective of delivering greater consumer protections.”
Companies offering no-interest BNPL draw customers and profit from retailer fees. They are not subject to consumer credit laws because they do not collect interest, and as a result, the sector’s activity has flourished due to an online shopping craze sparked by COVID-19 stimulus funds and historically low bank interest rates.
PayPal stated in its statement that it was in favour of BNPL providers being required to have credit licences and of laws requiring them to determine if a user qualifies for a loan beyond a “acceptable level.”
Without incurring the entire “costs generally involved with partaking in the credit reporting regime,” the business found “merit in further examination of the establishment of a tailored BNPL credit reporting framework.”
The largest BNPL business in Australia, Afterpay, which Twitter co-founder Jack Dorsey’s Block Inc. plans to acquire in 2022, argued in its submission that BNPL businesses should be required to adhere to an industry-run code of conduct because “the status quo has demonstrated its ability to prevent consumer harm.”
In its proposal, the Australian Securities and Investments Commission demanded that consumer protection laws be applied to the BNPL industry because “credit products with identical features and the same purpose and function should be handled the same manner.”