Buy Now Pay Later Code

Frequently Asked Questions

AFIA Buy Now Pay Later Code of Practice FAQ'S

AFIA and its BNPL members – Afterpay, Brighte, flexigroup, Latitude, Openpay, Payright and Zip Co – are responding to ASIC’s Report 600 and the Senate Economics Reference Committee,which recommended the development of a Code of Practice for the BNPL market.

As part of finalising a world-first industry code of practice for this sector, we have a tremendous opportunity, and responsibility, to get this right and strengthen consumer protections for BNPL customers, while preserving customer choice to make purchases and payments in a way that suits their needs.

The BNPL Code addresses the Senate Committee’s recommendations and ASIC’s findings and goes above and beyond the law by ensuring customers have strong safeguards in place that help them better understand the product and their rights. It also sets standards around helping those customers that experience financial difficulties. Importantly, it means customers of BNPL services, that are members of AFIA, have access to the Australian Financial Complaints Authority (AFCA), the independent external dispute resolution scheme, if they have a complaint, they can’t resolve directly with the BNPL provider.

  • Assess customers to ensure their product or service will be suitable for them prior to providing
    it. As part of this, they will:
    o take into account customers’ characteristics based on the common aspects of their
    objectives, financial situation and needs; and
    o have processes in place to identify customers who may have a higher likelihood of
    vulnerability. 

  • Using the information provided to them, only provide their products or services to customers who they assess have the ability to pay for the product or service over time;
  • Provide customers with access to internal complaints handling, so complaints are resolved quickly and fairly, and if they cannot be resolved, can be taken to AFCA;
  • Once approved for their products or services, they will ensure there are safeguards so our product or service remains suitable for customers. They will:
    o Cap their fees and keep them fair;
    o Give at least 40 business days before introducing new or existing fees perspective
    o Not provide any additional products or services or increase the amount of the current product or service if the customer is in arrears at the time of the request for additional products or services or increase in limit;
    o Adjust customer’s future spending limits based on their repayment history; and
    o Proactively provide Financial Hardship assistance.
  • Monitor their products or services to ensure they remain suitable to their customers and monitor how customers are using the products or services to identify whether they are meeting their needs and whether they remain suitable.
  • Aligning and adopting early proposed legislation relating to Design and Distribution
    Obligations;
    • Capping fees and keeping them fair;
    • Automatically opting customers out of receiving promotional material if they are in arrears or
    in Hardship; 
  • Even where they are not required by law, giving the customer the opportunity to take a complaint to AFCA if customers are unhappy with their response;
  • Not listing default on a customer’s credit reference file while they are considering a request for Financial Hardship, unless legally required to do so;
  • Not seeking recovery of, and not selling statute-barred debts; and • Never initiating bankruptcy proceedings against customers and never allowing their agents to do so.

The Code requires all Code Compliant Members to adhere to ASIC’s guidance for all marketing materials. BNPL Providers also have existing legal obligations to ensure that their marketing is not misleading to customers.

Each Code Compliant Member will take reasonable steps to ensure that its merchants or retailers adhere to the minimum standards which include communicating clearly when dealing with consumers and in marketing and advertising material that relates to Buy Now Pay Later Products or Services.

A Code Compliance Committee (CCC), independent of AFIA and the BNPL Providers, will be established to assess if BNPL providers meet criteria for becoming code compliant.The CCC will then monitor and enforce the Code. This Committee’s governance will follow similar AFIA codes, but the Committee is yet to be appointed. It will however include a customer representative.

Consistent with other industry compliance governance, the CCC has the power to impose sanctions on members who have breached the Code, ranging from formal warnings, requiring a rectification process, requiring a compliance audit, suspending through to revoking their membership.

In addition, the AFIA Board may also take action in relation to a non-compliant member. The actions will be meaningful to customers (which may include using remedies such as changing processes, re-training staff and revoking Code Compliance and AFIA membership). Stakeholders, customer advocates and customers will be engaged throughout the development of the code and their feedback taken into consideration, including appropriate sanctions