The Australian Finance Industry Association’s (AFIA) world-first Code of Practice for the Buy Now Pay Later (BNPL) sector has come into effect on 1 March 2021.

The BNPL Code goes above and beyond the law in Australia, setting best practice standards for the sector and strengthening consumer protections, while preserving customer choice to make purchases and payments in a way that suits their needs and preferences.

AFIA has worked with its BNPL members and key stakeholders such as consumer advocates to develop the Code. There has been broad consultation to understand the key issues that the Code should address, and which would bring most value and confidence to consumers, advocates, ASIC, and other stakeholders.

The growth and diversity of BNPL products and services enhances consumer choice, according to AFIA CEO, Diane Tate.

“It brings to life the concept that innovation and competition are for the ‘everyday person’ and that this can be achieved while codifying strong consumer protections,” she said.

“The BNPL sector includes a broad range of business models so customers wanting a BNPL option can choose the right one for them depending on their payment preferences, the purchase type and their circumstances. BNPL is a way to budget and manage money effectively by paying for purchases in instalments without the burden of interest.”

On the Code, she highlighted the key aspect is safety for consumers. “From the get-go, strengthening consumer protections across the sector was a focus for AFIA and its BNPL members. The Code is explicitly consumer focused and has nine commitments that signatories make directly to the people that use their products and services.”

She added: “All Code Compliant BNPL providers conduct suitability assessments before a potential customer can make a purchase and that there will be additional checks to prevent customers extending themselves further, for instance, if they are showing signs of difficulty making repayments.

“On top of that, there are detailed commitments to help people that find themselves in financial hardship. And it is mandatory for all providers to be members of the external dispute resolution service – the Australian Financial Complaints Authority (AFCA).”