## April 2024

# Good Shepherd response to the Treasury Laws Amendment Bill
 2024: Buy Now, Pay Later


Good Shepherd welcomes the release of the Treasury Laws Amendment Bill 2024: Buy

Now, Pay Later (the draft laws), and applauds the Australian Government for regulating

Buy Now Pay Later (BNPL) as credit.

**About Good Shepherd**

Good Shepherd aspires for all women, girls and families to be safe, strong, well and

connected. We are Australia’s oldest charity working to support women and girls

experiencing abuse and disadvantage. Good Shepherd provides place-based, integrated

services in the areas of family violence, financial insecurity, and youth disadvantage.

Through our Financial Independence Hub and No Interest Loan (NILs) programs we assist

women and families around Australia to build financial wellbeing.

**Why BNPL regulation is needed**

Good Shepherd’s practitioners repeatedly see the harms of unregulated BNPL supply. A

Good Shepherd perspective on the use and harms of BNPL is set out in our 2022 Safety net

for sale report.[1] As this report explains, unconstrained BNPL supply causes financial harm,

and creates an avenue for financial abuse. Almost 70% of surveyed Good Shepherd

practitioners had seen BNPL-related financial abuse among clients with BNPL debts.

Financial abuse via BNPL can be perpetrated through coercion (i.e. where a person is

forced to open a BNPL account for the benefit of the perpetrator), or by fraudulently

opening an account in the name of someone else, without that person’s knowledge or

consent.

The draft laws should be designed to prevent financial abuse via BNPL, and ensure victim
survivors can access timely remedies when financial abuse does occur, consistent with

the National Plan to End Violence against Women and Children 2022-2032, and the

National Strategy to Achieve Gender Equality.

BNPL is a highly gendered phenomenon tied to women’s economic insecurity. At Good

Shepherd, the groups with the highest BNPL use are women, single parents (most of whom

are women), younger people, and those on low incomes.[2] This is also true of the broader

community. Using 2021 transaction data of over 800,000 BNPL users at a major Australian

financial institution, a University of Sydney study found that of these users:

-  63% were women

1 Good Shepherd (2022) Safety net for sale: The role of Buy Now Pay Later in exploiting financial

vulnerability.

2 Ibid.


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the average age was 33 years

40% had more than one BNPL account – these users were more likely to be from a

lower socioeconomic area and receive income support.[3]

Family violence victim-survivors feature among BNPL customers. In the general

population, 1 in 4 women have experienced violence by an intimate partner or family

member, and 1 in 6 women have experienced economic abuse by a partner.[4] Statistically,

it is therefore likely that a BNPL provider will be engaging with a customer who has

experienced family violence.

**This submission**

In this submission we focus on key improvements that can be made to the draft laws to

better protect our clients from financial abuse and hardship, and to ensure they can

obtain remedies and redress in cases of family violence. We recommend:

-  requiring disclosure of choice of lending regime and suitability assessment policies

-  removal of the presumption that BNPL products under $2000 are suitable for the

requirements and objectives of the customer

-  verification of customer income

-  proper credit checks

-  removal of features that promote BNPL account increases

-  improved remedies in cases of family violence.

We also reiterate recommendations for policy measures beyond this regulatory reform

process. As Good Shepherd recommends in the Safety net for sale report, tackling harmful

BNPL use means addressing the drivers of that use, alongside introduction of regulatory

protections. Our practitioners continue to see clients using BNPL because they lack

adequate incomes, including social security incomes. BNPL use is evident in situations of

family violence. In the absence of proper financial supports, women are resorting to debt

in order to relocate, refurnish their homes, and meet their children’s needs. When child

support is withheld (a form of financial abuse in itself), women turn to BNPL to feed

themselves and their children. We reassert our recommendations for:

-  increases to JobSeeker and related working-age payments

-  doubling of the Escaping Violence Payment from $5000 to $10,000 to bring it into

line with Victoria’s Flexible Support Packages

-  consideration of the economic effect of family violence in family law decision
making, and measures to prevent deliberate misuse of family law proceedings to

further drain victim-survivors of financial resources.[5]

3 Boshoff E, Grafton D, Grant A and Watkins J (2022) ‘Buy Now Pay Later: Multiple accounts and the

credit system in Australia’, https://dx.doi.org/10.2139/ssrn.4216008.

4 [Australia Bureau of Statistics (March 2023) Personal Safety, Australia.](https://www.abs.gov.au/statistics/people/crime-and-justice/personal-safety-australia/latest-release)

5 Confidential Good Shepherd submission to Exposure Draft: Family Law Amendment Bill (No. 2) 2023.


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responsible lending obligations.

**Require disclosure of lending regime and suitability assessment policies**

Require BNPL providers to publicly disclose their suitability

assessment policies, and whether they have elected to follow the full or tailored


The draft laws give BNPL providers the option of following either the full responsible lending

obligations (RLOs), or a tailored RLO regime that will apply to BNPL/low-cost credit

contracts. BNPL providers will also have to develop suitability assessment policies.

BNPL providers[6] should have to publicly disclose these policies, and which RLO regime they

have elected to follow, on their websites and in other public communications. This

information needs to be readily available to our practitioners, so they can assess whether

a client has been irresponsibly provided with BNPL under either the full RLO regime, or the

tailored RLO regime for BNPL.

This transparency is also important for Australian Securities and Investments Commission

(ASIC) monitoring and enforcement, and Australian Financial Complaints Authority

(AFCA) identification of systemic issues in the BNPL sector. To assess the new laws’

performance, research, regulatory and complaints bodies must be able to identify any

association between choice of RLO regime, the standard of a provider’s suitability

assessment policy, and:

-  rates of lending to financially vulnerable customers, based on a BNPL provider’s

target market and/or provider data about these customers

-  default rates

-  financial hardship rates

-  customer experiences of financial abuse associated with BNPL, i.e. coercive or

fraudulent BNPL debts (revealed through internal or external complaints)

-  internal and external (AFCA) complaint rates

-  ASIC enforcement action.

**Remove presumption of suitability for BNPL products under $2000**

**Recommendation 2: Remove the presumption that BNPL products under $2000 are**

suitable for the requirements and objectives of the customer.

The draft laws feature a problematic presumption that BNPL products under $2000 are

suitable for the requirements and objectives of the customer. The $2000 threshold means

this presumption will apply to the overwhelming majority of BNPL products.[7]

The presumption of suitability is problematic for several reasons. First, it implies that BNPL

products under $2000 are low risk. Any credit products under $2000 have the potential to

6 For simplicity, a reference to BNPL providers in this submission is a reference to licensees that

provide ‘low cost credit contracts’ under the draft laws.

7 Parliament of the Commonwealth of Australia, House of Representatives (2024) Exposure Draft

Explanatory Materials – Treasury Laws Amendment Bill 2024: Buy Now, Pay Later.


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cause hardship for people on very low incomes of around or less than $1000 per fortnight

(that is, most social security incomes). This risk arises even if no interest is charged, or only

low effective interest rates/default fees are charged. Suitability must be assessed on a

case-by-case basis, and a presumption of suitability works against this.

Second, the presumption creates opportunities for financial abuse. Good Shepherd

practitioners report that BNPL products under $2000 are attractive to family violence

perpetrators. Financial counsellors in our Financial Independence Hub program routinely

assist family violence survivors who have multiple, abusive BNPL products in their names,

including accounts under $2000. The requirements and objectives limb of the RLOs can

help to detect and prevent this financial abuse. Any weakening of this limb via the

presumption of suitability limits the chance of identifying whether a BNPL product benefits

the applicant, or someone else. The utility of a full requirements and objectives check is

recognised by the Australian Banking Association’s Industry guideline on preventing and

responding to family and domestic violence (ABA Guidelines).[8] This requires banks to

consider whether an applicant will receive a substantial benefit from a credit product,

including ‘general use’ credit cards that operate in a similar way to BNPL products.

Third, the presumption of suitability introduces an unnecessary risk of non-compliance

and harm. The presumption may create confusion, or be misused by BNPL providers

whose business models operate at the margins of responsible lending laws. Less

responsible BNPL providers may rely heavily on the presumption, exploit its legal

ambiguity, cause financial hardship, and evade enforcement action.

**Require income verification**

**Recommendation 3: Require BNPL providers to verify a customer’s income, regardless of**

the amount of the BNPL product.

We strongly support BNPL providers having to enquire about a customer’s income and

expenses to assess affordability. However, under the draft laws, a BNPL provider can rely

solely on unverified income and expenses information provided by the customer if the

circumstances support this. The lack of verification requirements under the tailored RLO

regime for BNPL fundamentally undermines a responsible lending regime of any kind. A

lack of verification means customers can inadvertently misrepresent their income and

expenses, and BNPL providers can exploit this situation.

A lack of income verification makes it easier to perpetrate financial abuse by fraudulently

opening a BNPL account without a person’s knowledge or consent. Income verification, via

payslips or other means, would create a hurdle to financial abuse, making it more difficult

for a perpetrator to fraudulently open an account.

8 Australian Banking Association (2021) Industry guideline on preventing and responding to family

and domestic violence.


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**Require proper credit checks**

Liability Information.

We support the introduction of credit checks but are concerned that only a negative

Require BNPL providers to report and obtain Consumer Credit

credit check is required for BNPL products under $2000 (i.e. information about defaults

and other negative credit events). The suitability of a BNPL product cannot be assessed

unless the provider has a full picture of all credit liabilities. These liabilities include other

BNPL products, credit cards and consumer leases. BNPL providers should therefore have to

obtain Consumer Credit Liability Information (CCLI) when assessing the suitability of BNPL

products under $2000.

Multiple, unmanageable BNPL accounts are a significant issue among Good Shepherd

clients with BNPL debt. In 2022, 84% of surveyed practitioners reported that clients with

BNPL debt had tried to manage the debt by opening additional BNPL accounts, leading to

an unmanageable debt spiral.[9] Compounding debt hastens the decline into deep

financial hardship for clients who are already in a financially precarious state. Good

Shepherd practitioners also see clients with multiple, financial abuse-related BNPL

accounts and other credit obtained through coercion or fraud. Credit checks based on

CCLI provide an opportunity to identify ‘red flags’ in credit reports, which can then be

sensitively explored with the customer. This could potentially avert approval of more

abusive BNPL debt.

However, this approach depends on BNPL providers being mandated to participate in the

credit reporting regime. Good Shepherd practitioners see clients who have numerous

BNPL accounts, but these liabilities do not always appear on credit checks because BNPL

providers are not captured by the reporting regime. We understand voluntary reporting by

BNPL providers is very patchy. The lack of mandated reporting is another design flaw that

allows family violence perpetrators to conceal financial abuse via BNPL. The proliferation

of abusive debt is not fully visible to potential lenders, and not fully visible to victim
survivors and their advocates when accessing credit records.

**Avoid a BNPL lending regime that promotes account increases**

**Recommendation 5: Prevent BNPL providers conducting suitability assessments for**

amounts higher than the initial credit limit.

**Recommendation 6: Reduce the assessment validity period.**

Along with other consumer and community organisations, we previously recommended a

prohibition on unsolicited offers to increase account limits, similar to other credit

9 Good Shepherd (2022) Safety net for sale: The role of Buy Now Pay Later in exploiting financial

vulnerability.


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This protection is not provided under the draft laws. Instead, the BNPL provider

only has to seek the consent of the customer to an account increase. The draft laws are

currently designed to promote account increases, even if this conflicts with the

requirements and objectives of the customer, and any changes in their financial

circumstances. These features should be removed.

First, the suitability of a BNPL product should be assessed at the amount the customer

requests, not at a higher amount than the initial credit limit (as the draft laws propose).

Assessing at a higher amount contradicts the stated requirements and objectives of the

customer, and is in conflict with this limb of the RLOs. Good Shepherd works with clients

who are restoring their finances after hardship and family violence. BNPL providers should

respect their agency in determining an affordable BNPL amount. This is especially

important for family violence survivors who were burdened with coercive debts of various

kinds during abusive relationships, whereby their financial agency was undermined and

disrespected.

Second, it is inappropriate for a suitability assessment to be valid for 2 years, and cover

increases up to the assessed amount within that period. People’s financial circumstances

can change very quickly, particularly at a time when essentials like rent, mortgage,

energy, food and petrol costs are heightened and volatile. Incomes can also be volatile

when people are in short-term, insecure work.

Each of these features (initial assessment at a higher amount, and a 2-year assessment

validity period) also make it easier to sustain and worsen financial abuse, by coercing

victims into increasing account limits without the barrier of a new suitability assessment.

**Improve family violence remedies**

**Recommendation 7: Examine whether mandated family violence assistance standards**

should be introduced for BNPL providers and other creditors under the national credit

regulatory regime.

We are very pleased that BNPL providers will be subject to the hardship requirements

under the National Consumer Credit Protection Act 2009, which will create a regulated

right to BNPL hardship assistance in cases of family violence and other circumstances. At

present, Good Shepherd practitioners seek remedies for clients in financial hardship and

financial abuse/family violence situations, but these remedies are provided on

compassionate grounds and rely on the goodwill of the individual BNPL provider.

We are also pleased that BNPL providers will be required to have internal dispute

resolution processes and be members of AFCA, as Australian Credit Licensees. This

establishes an important complaints and resolution pathway for our clients.

10 Joint consumer submission to Treasury: Regulating Buy Now, Pay Later in Australia – Options

Paper, December 2022.


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The next, immediate step is for the BNPL sector to introduce family violence guidelines

under the Buy Now Pay Later Code of Practice. These should include a requirement that

BNPL providers have a family violence policy; staff training in family violence and trauma
informed practice; and dedicated assistance for customers experiencing family violence.

Policies and guidance under the Code of Practice should align with the ABA Guidelines.

The guidance should contain a clear and consistent position that evidence of family

violence (for example, intervention orders, police reports, or caseworker verification)

should not be requested or required of victim-survivors when disclosing family violence

and seeking relief such as debt waiver. Requesting this type of information is highly

inappropriate and perpetuates harm. Good Shepherd practitioners report that BNPL

providers and other creditors request this type of evidence. It may be dangerous for a

person to retrieve documentary evidence, and victim-survivors do not necessarily have

access to these documents (for example, where they are fearful of reporting to police or

seeking an intervention order). Other industries have departed from this harmful practice.

Energy retailers operating in the National Electricity Market must follow regulated family

violence assistance standards, including that they do not require documentary evidence

of family violence in order to assist customers.[11]

Treasury should examine whether mandated family violence assistance standards should

be introduced for BNPL providers and other creditors under the national credit regulatory

regime.

11 [See Australian Energy Market Commission (n.d.) Protecting customers affected by family violence,](https://www.aemc.gov.au/rule-changes/protecting-customers-affected-family-violence)

AEMC website, accessed 22 March 2024.


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