If you've ever wondered whether buy now, pay later is 'real' debt, the Australian government just gave you an answer. From June 10 this year, BNPL providers like Afterpay, Zip, and Klarna became regulated credit providers, subject to the same laws that govern your bank. It's a significant shift, and it changes what rights you have when you use these services.
For nearly a decade, BNPL companies operated in a regulatory grey zone. They weren't classified as credit providers, so they weren't bound by responsible lending rules, credit reporting obligations, or the same consumer protections that applied to traditional lenders. That meant they could approve purchases without checking whether you could actually afford them. A 2022 CHOICE survey found 76% of BNPL users had struggled to make repayments, cut back on essentials, or taken out additional loans to meet their obligations.
What Actually Changed
Under the new framework, BNPL contracts are now treated as 'low-cost credit contracts' under the National Credit Code. This means providers must conduct 'responsible lending assessments' before approving a purchase. They have to ask questions about your income, existing debts, and financial obligations. They can't just assume you can repay. ASIC's Regulatory Guide 281, released in May 2025, specifically names financially vulnerable consumers—including those on Centrelink payments, those with repeated late fees across credit products, and people showing signs of family violence or financial abuse—as groups providers must carefully assess.
There's also a credit limit presumption: contracts under $2,000 are presumed to meet your needs unless evidence suggests otherwise. Importantly, this doesn't let providers skip asking about your circumstances; it just means they don't need to do exhaustive assessments for very small purchases.
Why Defaults Matter Now
Here's where the regulation gets serious for your financial future. Before June 2025, most BNPL providers didn't report your payment history to credit bureaus. That meant missing Afterpay payments didn't directly hurt your credit score. Now, they're regulated identically to other credit providers, and defaults have teeth.
If you default on a BNPL contract—typically once you're 60+ days overdue and the amount exceeds $149—that default goes on your credit file. A single default listing reduces your credit score by approximately 100 to 250 points. More critically, it stays there for five years, even after you've paid it off. For context: major Australian banks (CBA, NAB, ANZ, Westpac) typically reject home loan applications automatically when any default appears on file. Non-bank lenders will consider you, but they'll charge 2 to 4 percentage points above standard rates. On a $500,000 mortgage, that's $10,000 to $20,000 in additional interest per year.
The Consumer Protection Gains
The regulation isn't just punitive; it creates genuine protections you didn't have before. BNPL providers must now assess whether a purchase would cause you hardship. If you request a payment variation—say, extending your repayment period—they must consider it seriously and document their response. They can't refuse without genuine reason. You also have access to dispute resolution through the Australian Financial Complaints Authority (AFCA) if a provider acts unfairly.
Crucially, providers can no longer operate without a credit licence. If your BNPL provider doesn't hold one, they're operating illegally. You can check whether a provider is licensed on ASIC's website.
What You Should Do
If you use BNPL, the short version is this: treat it like real debt, because it is. Don't approve a purchase unless you can pay it in full by the due date. Check your existing BNPL and credit commitments before signing up for another service; multiple small commitments add up quickly. If you're already struggling with BNPL repayments, contact your provider and ask about payment variations. They're now legally obliged to take your hardship request seriously.
And before applying for a mortgage or large loan, check your credit report for any defaults or late payments. If there are errors, dispute them immediately. Your credit score will recover, but it takes time—and five years is a long time to pay a premium on a home loan.