Australia's BNPL reforms brought the sector under the National Consumer Credit Protection Act 2009 from 10 June 2025, subjecting providers to Australian Credit Licences and responsible lending obligations. Before those reforms, BNPL operated outside most consumer credit rules. For consumers, this means stronger protections — but the contracts themselves still contain traps. Before signing a BNPL agreement today, understand what the new regime gives you and what providers are still trying to get away with.
What is a BNPL Consumer Credit Reforms?
Buy Now Pay Later (BNPL) in Australia is a consumer credit product that splits a purchase into scheduled installments, traditionally marketed as 'interest-free'. From 10 June 2025, BNPL providers must hold an Australian Credit Licence under the National Consumer Credit Protection Act 2009 (Cth) and comply with a modified responsible lending regime under a new category: 'low cost credit contracts'. The reforms include unsuitability assessments, hardship protections, fee caps, and ASIC enforcement. Major providers include Afterpay, Zip, Humm, Klarna, and Paypal Pay in 4.
Red flags to watch for
Post-reform, Australian BNPL contracts must disclose the total cost of credit. 'Interest-free' claims must be accurate once fees are considered.
The reforms cap BNPL fees at specified amounts. Contracts with unlimited compounding or stacking fees likely breach the new Code.
Under the reforms, credit limit increases require positive consumer consent and an unsuitability assessment.
Section 72 NCCP gives consumers the right to request hardship variations. BNPL providers are now subject to this and must address it in the contract.
Banking Code of Practice and ePayments Code give consumers clear cancellation rights. Contracts that obscure this breach good-faith obligations.
Credit licensees must be AFCA members and cannot require consumers to waive access. Any such clause is void.
If you return goods, your BNPL contract should track the merchant refund. Indemnities making you liable for payment despite a valid return are unfair.
Your legal rights
Australian consumers in BNPL contracts are protected under: the National Consumer Credit Protection Act 2009 (Cth) as amended by the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024; the National Credit Code (Schedule 1 of the NCCP); the ASIC Act 2001 (consumer protections); the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010) where applicable; the Banking Code of Practice (industry code); and the ePayments Code. Enforcement is by ASIC. Complaints go to AFCA (the external dispute resolution body), which has free jurisdiction over most consumer credit disputes. Severe penalties (up to $16.5 million per contravention for corporations) apply to breaches of responsible lending.
Questions to ask before you sign
- 1Is the BNPL provider licensed under the NCCP, and is this disclosed?
- 2What is the total cost of credit, including all fees, if all payments are made?
- 3What late and dishonour fees apply, and are they capped?
- 4How are credit limit increases handled, and is my consent required?
- 5What hardship assistance is available, and how do I request it?
- 6How do I cancel direct debits, and how is that addressed in the contract?
- 7Is the provider an AFCA member, and how do I access dispute resolution?
- 8What happens if I return goods to the merchant — how is my BNPL refund processed?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.