# Submission to Treasury’s consultation on Buy Now Pay Later regulatory reform 

**Date of submission: 9 April 2024**

About Financial Counselling Victoria and the financial counselling sector

Financial Counselling Victoria (FCVic) is the peak body and professional association for
financial counsellors in Victoria. We provide resources and support to financial
counsellors and their agencies who assist vulnerable Victorians experiencing financial
difficulty. We work with governments, banks utilities, debt collection and other
stakeholders to improve approaches to financial difficulty for vulnerable Victorians.

Financial counselling is a free, confidential, and independent service. It provides vital
help for people experiencing, or at risk of, financial hardship. Financial counsellors are
uniquely qualified professionals, specially trained to deal with complex financial matters.
They assist more than 23,000 Victorians each year – including people impacted by
catastrophic natural disasters, newly arrived migrants and refugees, and more than
3,800 family violence victim-survivors.

## About this submission

We welcome the opportunity to provide a submission to Treasury’s Buy Now Pay Later
regulatory reform consultation. Our members have told us many stories about the
predatory nature of Buy Now Pay Later (BNPL) credit providers, payday loan providers,
and other low cost credit contract providers and lenders, and the negative impacts on the
financial wellbeing of vulnerable Victorian clients.

## We note and support the excellent consumer advocacy work by CHOICE in this field, with partners including our federal peak body Financial Counselling Australia, Financial Rights Legal Centre and Consumer Action Law Centre – to name a few. 
 We support all recommendations put forth by these consumer advocacy bodies in their submission to this consultation and provide a few further observations and recommendations.

Further questions about this submission can be sent to


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## Our recommendations

**_Note - We support the CHOICE & partners recommendation of making the partial_**
_credit check obligation apply to all BNPL loans, including those under $2,000 as a_
_preferred recommendation. If this recommendation is not suitable, an alternative is_
_provided below._

**01. Revise the financial threshold which triggers partial credit checks from**

**$2,000 to a changeable amount which is equal to the Australian Bureau of**
**Statistics data at that point in time of the median weekly income less tax of**
**an employee.**

As an alternative to the above preferred recommendation, we suggest that a financial
threshold tied to median weekly income less tax will better align the average consumer’s
ability to service a loan’s repayment terms with the trigger point at which partial credit
checks and protections are enforced. We see that this will have a particularly positive
impact for those consumers who are particularly vulnerable to predatory credit providers.

We note that those on incomes lower than the Australian median are still likely to be
negatively impacted, especially where they hold multiple accounts with low balances.
However, in the interest of a logical financial threshold which is indexed to individual
capacity to service a loan, we believe that one tied to median weekly incomes less tax
makes the most sense.

**02. Revise maximum fees and charges from being dollar cost amounts to a**

**percentage of the amount owed OR a dollar cost amount, whichever is**
**lower.**

In section 69E of the Regulations, we recommend that wherever a dollar cost amount is
noted in relation to maximum fees and charges (e.g. $200, $125) that this is revised to
reflect a relevant percentage amount OR the dollar cost amount, whichever is lower. This
better protects consumers with low balances from being charged higher amounts to
maintain their accounts, adding unnecessary fees and charges that increase the amount
of their debt and makes it increasingly difficult to break the debt cycle.

For instance, where a client has a $750 debt on their BNPL account, charging a fee of
5% will result in fees of $37.50 rather than $200. Alternatively, where a client has a
$7500 debt, charging the maximum fee of $375 rather than a 5% rate fee of $255, will be
a more reasonable outcome.

This structure gives vulnerable consumers a fighting chance of repaying their debts,
without needlessly falling into a debt cycle of increasing fees and charges.

**03. Proactively increase awareness of complaints mechanisms**

As an additional measure, we recommend that internal complaint mechanisms, and
external complaint mechanisms such as AFCA’s dispute resolution service be required to
be proactively communicated to clients, for instance, by being included in all email and
print correspondence. For instance, standard text to be included on the bottom of all
correspondence that states –

_“If you would like to make a complaint about our services, you can contact our internal_
_complaints service on XXXX. You can also make a complaint to the Australian Financial_
_Complaints Authority at www.afca.org.au”._

We also note that AFCA should be supported to increase their capacity to respond in a
timely manner to complaints made by consumers. Financial counsellors have reported
that AFCA’s capacity to respond is currently compromised due to an increase in demand
– and AFCA has also noted these delays themselves on their website.

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Noting that there are limitations based on AFCA’s funding model as dictated by
legislation, we recommend that reviews occur in order to ensure that the service is able
to keep up with the expected increased demand after this proposed legislation passes
and more consumers are aware of their rights when it comes to credit providers.

**Thank you for the opportunity to provide this submission to the Treasury**
**consultation on behalf of Victorian financial counsellors who each year, assist**
**over 23,000 vulnerable people experiencing cost of living pressures.**

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