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Are you a customer buying through a buy now pay later scheme? If so, this article will help you understand what you might be able to expect from certain businesses offering buy now pay later schemes, and what you can do if certain standards are not met. 

What is Buy Now Pay Later? 

Buy now pay later schemes allow consumers to buy goods or services and pay off the price in interest-free instalments.

Commonly, businesses use the services of a buy now pay later provider when selling their products. In this case, the business is effectively an intermediary between the customer and the buy now pay later provider. Further, you as a customer, are essentially taking a loan from the provider. However, some businesses may wish to offer their own buy now pay later service, meaning they would be the short term lender to the customer. 

Examples of well-known buy now pay later providers include: 

  • Afterpay;
  • Certegy; and 
  • Paypal Pay in 4. 

Countless businesses use these providers when selling their goods and services. 

Who is AFIA?

Australian Finance Industry Association (AFIA) represents its members to drive positive change in the finance industry and be a voice for the industry in engagement with government and regulators in relation to law reform. AFIA can collaborate with government and other key stakeholders concerning initiatives and frameworks affecting the finance industry. 

AFIA’s Buy Now Pay Later Code of Practice

AFIA published a code of practice in March 2021, specifically in respect of buy now pay later schemes (BNPL Code). The BNPL Code aims to assist businesses adopting buy now pay later schemes to proactively increase consumer protections for these services or products. 

The BNPL Code applies to ‘code compliant members’, which currently includes the following businesses: 

  • Afterpay; 
  • Brighte;
  • Humm group;
  • Klarna; 
  • Latitude; 
  • Openpay;
  • Pay right; and
  • Zip. 

More businesses may become code compliant members as time goes on. 

The BNPL Code sets out key commitments that the code compliant members make to their customers in relation to buy now pay later schemes. There are nine key commitments that the BNPL Code members make to their customers, which include, amongst others to:

  • provide high-quality products and services; 
  • be fair, honest and ethical in all dealings with customers; and
  • undertake ongoing reviews of products and services.

The full BNPL Code is detailed and constitutes a contract, which is legally binding on the code compliant members. 

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Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.

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What Fees Might You Be Charged Under a Buy Now Pay Later Scheme?

You could be charged any one or more of the following fees if using buy now pay later:

  • account keeping fee: a fixed fee charged in relation to your buy now pay later account, usually charged if you have an outstanding balance on a product or service;
  • establishment fee: an upfront fixed fee charged when you set up your buy now pay later account;
  • payment processing fee: an administrative cost which may be charged per repayment; and
  • late fee: fees charged when you do not make your repayment on time. 

You can check with the buy now pay later provider to see if they apply any of these fees. The AFIA BNPL Code of Conduct has rules in relation to what fees these providers can charge. 

For example, in relation to buy now pay later products or services that are required to be repaid in 62 days or less, you cannot be charged fees in excess of 5% of the purchase. In relation to buy now pay later products or services where the repayment term is longer than 62 days, fixed fees cannot exceed more than $200 AUD in the first year and $125 AUD per year thereafter. Finally, late fees can only be charged where the buy now pay later provider has contacted you to remind you to make payment. 

What Does This Mean for Customers Using Buy Now Pay Later Schemes?

If you are a customer that has used a buy now pay later service and is unhappy with a part of that service, you could consider if the business is a BNPL Code compliant member. You may have rights under the BNPL Code if the business is a compliant member. Additionally, if you consider the business has breached one of the commitments contained in the BNPL Code, you can contact the business directly and attempt to resolve the issue. If that does not resolve the issue for you, you can make a complaint to the Australian Financial Complaints Authority for non-compliance with the BNPL Code.

Key Takeaways

If you are a customer and wish to discuss an issue you have with a buy now pay later scheme, LegalVision’s dispute and regulatory lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is buy now pay later? 

Buy now pay later is a scheme or service allowing you to buy goods or services and pay off the price in interest-free instalments.

Who is AFIA?

The Australian Finance Industry Association (AFIA) is an association representing its members in the finance industry. It acts as a voice when engaging with government and regulators. AFIA also has a buy now pay later code of practice that applies to code compliant members.


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