Buy now pay later used to operate in a regulatory grey zone. Pay in four instalments, no interest, no credit check. It felt like a payment method, not a loan. That changed nine months ago when the government drew a line in the sand.
From June 10, 2025, BNPL became credit. Afterpay, Zip, Sezzle, and smaller competitors now hold Australian credit licences, comply with the National Consumer Credit Protection Act, and report your payment behaviour to credit bureaus just like a credit card company. For the first time, a missed BNPL payment can damage your credit score and your borrowing power.
Why does this matter? Because BNPL debt is quietly exploding. The average Australian now carries $17,634 in personal debt outside mortgages, up 16% from $15,179 just two years earlier. A 2020 ASIC study found that one in five BNPL users cut back on essentials, including meals, to meet repayment obligations. That's the human cost hiding behind the "buy now, stress later" convenience.
Afterpay's recent $50 million settlement over unresolved merchant disputes signals how seriously regulators are now treating the sector. Providers must conduct proper credit assessments, respect hardship claims, and resolve disputes within 14 days. The wild west is over.
The regulatory pivot hasn't killed the market. BNPL is forecast to reach $18.34 billion in Australia by end of 2026, growing 17.5% annually. But the game has fundamentally changed. You can no longer treat BNPL as a loophole around credit rules. Even a small unpaid balance can now delay a mortgage application or reduce your available credit with banks.
The lesson for shoppers is straightforward: treat BNPL like credit, because it now is credit. Check what gets reported to your credit file. Track how many BNPL commitments you're carrying. If you miss a payment, contact the provider immediately to explain hardship and work out a payment plan. This regulation exists because too many Australians were using BNPL as a pressure valve for cost-of-living stress, not as a genuine payment convenience. The safety net has just gotten smaller.
For investors watching the sector, regulation has done what regulation often does: it's weeded out marginal players and cemented the position of providers that can manage compliance and underwriting efficiently. Afterpay and Zip, despite the settlement, have the capital and scale to absorb the compliance costs. Smaller entrants face a much steeper climb.