'They are a credit product': The Commonwealth Bank says its time for the buy now, pay later sector to face tougher regulation

Commonwealth Bank CEO Matt Comyn (Joel Carrett, SMH)
  • Commonwealth Bank CEO Matt Comyn has unleashed a public rebuke of the buy now, pay later sector and the failure of regulators to get involved.
  • Fronting a parliamentary committee, Comyn said the industry and its players had become so big that it was high time regulators stepped in.
  • Comyn argues that customers should be subject to credit reviews and that merchants shouldn’t be prevented from passing on service costs to customers.
  • Visit Business Insider Australia’s homepage for more stories.

Australia’s largest bank has publicly lobbied the federal government and regulators to take the explosive growth of buy now, pay later companies seriously, as millions of Australians gain access to unrestricted credit.

Fronting a House Committee on Thursday, Commonwealth Bank CEO Matt Comyn said it was “quite a feat” that the likes of Afterpay had convinced policymakers to let them play by their own rules.

With an estimated $10 billion a year flowing through BNPL platforms, Comyn told federal MPs that the time had come for millions of Australians to be properly protected, calling for the platforms to run credit checks on their customers.

“They are exempt from the comprehensive credit reporting regime [and] the consumer data right. They are a credit product, they are considered a credit product … but they actually rely on an exclusion that was drafted many years before the category actually existed,” he said.

If they were to be covered by the CCR, banks and other financial institutions would also be able to clearly see how much debt Australians had racked up on the services. With a transparent picture of their financial situation they could then better assess if customers could afford taking out loans or other credit products.

Allowed to grow unrestricted, drafting and playing by their own voluntary rules, the industry has swelled enormously. Afterpay is now a $37 billion giant. In second place, Zip has reached a $5 billion market cap, while Sizzle, Splitit, and Humm are collectively valued at around $2 billion.

“I don’t think it’s unreasonable given the size of the market, the scale of the individual players – in one instance being an ASX20 company – to make an investment in understanding their customers’ circumstances and financial position,” Comyn said.

“My point is based on size and scale, they are [now] beyond the point where the legislation framework that applies to that sector needs to be comprehensively reviewed.”

The industry, led by Afterpay, has so far led a concerted and successful lobbying campaign against attempts to rein it in. The arguments it has raised in doing so have been wide-ranging.

It has at various points tried to present itself as something more akin to Google and Facebook and a customer acquisition channel rather than a credit product.

More consistently it has argued that no-interest BNPL products compare so favourably to high-interest credit cards that it should be allowed to self-regulate so as not to give up a competitive advantage over the big banks.

Comyn disputed this on Thursday, arguing BNPL customers typically ran higher levels of debt, experienced greater levels of hardship and more often fell behind on their repayments.

The Commonwealth Bank is planning on rolling out its own payment instalment feature later this year, with users to be subject to credit assessments and stricter rules than required by the broader BNPL industry.

Comyn also weighed in on the subject of surcharging, calling for the Reserve Bank of Australia to allow retailers to pass on fees to customers.

“I also think it is appropriate for the businesses accepting buy now, pay later providers, who are effectively incurring costs somewhere between 3 and 6%, [to] be entitled contractually to pass on costs to consumers incurring those costs for them,” he said.

The RBA concluded last year that the industry was too small to regulate just yet.

As it grows and with the entry of the Commonwealth Bank and PayPal into the local market, it may only be a matter of time before regulators heed the call.

Afterpay did not immediately respond to a request for comment.

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