PayPal Holdings Inc wants buy-now-pay-later (BNPL) loans regulated, according to a submission to the Australian government, adding a powerful voice from within the sector calling for regulation.
The U.S. firm, which provides BNPL loans alongside its main money transfer service, said it had its own safeguards to protect shoppers from borrowing too much but the industry should face some regulation to ensure "consumer and industry certainty and competitive neutrality".
The submission, published by the government on Thursday as part of an inquiry into BNPL regulation, provides the most comprehensive account of PayPal's position on how much the sector should be supervised by the state. In their submissions, many other companies that sell BNPL loans stated that they support minimal or self-regulation.
The $88 billion company supported "a tailored, proportionate and thoughtful regulatory framework for the BNPL sector via the National Consumer Credit Protection Act to achieve the Government's objective to deliver greater consumer protections", PayPal said in the submission, signed by its Australia General Manager Andrew Toon.
BNPL firms attract customers by charging no interest and profit from retailer fees. Because they do not charge interest, they are exempt from consumer credit law, and their business has exploded as a result of the COVID-19 stimulus payments and ultra-low bank interest rates.
PayPal's submission said it supported mandatory credit licences for BNPL providers and rules requiring the companies to check a user's suitability for a loan above an "appropriate threshold".
The company saw "merit in further consideration of the development of a bespoke BNPL credit reporting framework" without the full "costs typically associated with engaging in the credit reporting regime".
Australia's biggest BNPL company Afterpay, bought in 2022 by Twitter founder Jack Dorsey's Block Inc, said in its submission that BNPL companies should have to follow an industry-run code of conduct and "the status quo has demonstrated its ability to prevent consumer harm".
The Australian Securities and Investments Commission, in its submission, called for the BNPL sector to be subjected to consumer protection law since "credit products with similar characteristics and the same purpose and function should be treated the same way".
The government has stated that it hopes to have BNPL regulation in place by 2023. Assistant Treasurer Stephen Jones said Australia had 7 million active BNPL accounts - one for every four people - and the government was committed to "getting the right balance in competition, innovation and consumer protection".