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Giving Credit Where Credit’s Due: Navigating ‘Buy Now, Pay Later’ Reforms
Substantive Law| What area(s) of law does this episode consider? | Recent amendments to the National Credit Code to regulate buy now, pay later providers. |
| Why is this topic relevant? | Buy now, pay later (BNPL) services have become increasingly popular in the consumer finance landscape in recent years, offering customers a convenient way to defer payments. Data from the Reserve Bank of Australia’s Payments System Board reported that between 2021-2022, Australia saw approximately 7 million active BNPL accounts (including multiple accounts owned by the same individual), which made up $16 billion in transactions; a whopping 37% rise from the previous financial year. Additionally, AFIA’s January 2023 report, The Economic Impact of Buy Now, Pay Later in Australia – Update, highlights the growing popularity of BNPL among merchants, reporting over 158,900 businesses accepting BNPL services; also a notable 17.4% increase compared to the prior year. This rise in popularity in Australia has led to some regulatory concerns, particularly about the protection of consumers. BNPL is largely unregulated under the National Credit Code and the National Consumer Credit Protection Act 2009 (Cth). To address these concerns, the Australian Government has proposed introducing new amendments. Under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024. These amendments will bring BNPL providers under the regulatory framework of the National Credit Code and thus the National Consumer Credit Protection Act 2009 (Cth). This shift represents a significant change for BNPL providers, especially those who have previously operated outside of traditional credit licensing frameworks. As financial services providers grapple with how to incorporate these rules into their business models, the role of legal advisers becomes essential in ensuring compliance while navigating the still-evolving landscape of BNPL regulation. |
| What legislation is considered in this episode? | National Consumer Credit Protection Act 2009 (Cth) (Credit Act) Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 (Bill). Corporations Act 2001 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth) |
| What are the main points? |
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| What are the practical takeaways for graduates and students? |
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| Show notes | Reserve Bank of Australia (2022), ‘Payments System Board Annual Report’ |
DT = David Turner; KS = Kerensa Sneyd
| 00:00:00 | DT: | Hello and welcome to Hearsay the Legal Podcast, a CPD podcast that allows Australian lawyers to earn their CPD points on the go and at a time that suits them. I’m your host, David Turner. Hearsay the Legal Podcast is proudly supported by Lext Australia. Lext’s mission is to improve user experiences in the law and legal services, and Hearsay the Legal Podcast is how we’re improving the experience of CPD. Buy now, pay later services, or BNPL services is the abbreviation we’ll be using today, have exploded in popularity since their introduction to the consumer finance landscape, offering customers a convenient, if a little unregulated way of deferring their payments. Data from the Reserve Bank of Australia’s Payment Systems Board reported that between 2021 and 2022, Australians saw approximately 7 million active buy now, pay later accounts, including multiple accounts owned by the same individual from different providers, which made up a total of $16 billion in buy now, pay later transactions. That’s a 37% rise from the previous financial year of 2020 to 2021. Additionally, AFIA’s January 2023 report, The Economic Impact of Buy Now, Pay Later in Australia, highlights the growing popularity of buy now, pay later amongst merchants, reporting that nearly 160,000 businesses accept BNPL payments. A staggering 17.4% increase in merchants compared to the prior year. But this rise in popularity in Australia has led to some regulatory concerns, particularly about the protection of consumers. Buy now, pay later is largely unregulated under the National Credit Code and the National Consumer Credit Protection Act. To address these concerns, the Australian Government has proposed introducing new amendments. Under the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024. These amendments will bring buy now, pay later providers under the regulatory framework of the National Consumer Credit Protection Act and the National Credit Code. And this is a pretty significant change for buy now, pay later providers, especially those who have previously operated and arguably relied upon their exclusion from traditional credit licensing frameworks. As financial services providers grapple with how to incorporate these rules and this increased regulation into their business models, the role of their lawyers and legal advisors becomes essential in ensuring their compliance whilst navigating the still evolving landscape of buy now, pay later regulation. Today, we’re joined by Kerensa Sneyd, Partner in the Financial Services team at Allens, who’s based in Melbourne. Kerensa has extensive experience advising on financial services regulation, including buy now, pay later providers, and her expertise will help us to unpack the key implications of these new amendments and what they’ll mean for both buy now, pay later providers and their consumers. Kerensa, thank you so much for joining me today on Hearsay. |
| 00:02:53 | KS: | Thank you, David. Good to be here. |
| 00:02:54 | DT: | Now, before we get into this topic, and I’m excited to talk about this topic, it’s a really interesting one to me. In the distant past of the late 2010s and early 2020s, I did a little bit of advisory work for some buy now, pay later startups, and I was surprised at how little there was to advise on really, in terms of applicable laws. So I’m really interested to see how the space is changing. Tell me a little bit about how you got into this area at Allens. |
| 00:03:17 | KS: | Yeah. So I’ve been at Allens coming on five years now and I came across just at the start of COVID – so January, 2020 – and before that I was at another firm and before that, again, I spent close to a decade working in house with banks. So I’ve been around retail banking and consumer credit for a long time. And coming across to Allens, my role here was to really stand up and develop the consumer credit practice and the retail banking advisory practice, as well as our front end AMLCTF practice as well. And so just pre-COVID, obviously there was a lot of momentum in the consumer credit space. There was a lot of new players that have started to introduce new products into the market, BNPL being one of them. And then since joining, I’ve had the opportunity to advise a number of different lenders who are providing products and services in the BNPL space. And it’s been a really interesting, particularly the last three, four years, the COVID years as well, there was a lot of turmoil if you like in the market because of changes in interest rates and consumer behaviour. So there’s been a lot happen in a very short space of time for BNPL providers and people who use BNPL products. You. Can’t go into a major shopping mall or walk past any sort of retail shop these days without seeing at least one BNPL product available to use. And I think if you think back probably only five or six years ago, you rarely would see, advertised, a BNPL product. So to think of the growth in just the 2020s and onwards has been really significant. So a lot of what we do here at Allens is advising different lenders on consumer credit, both regulated and unregulated. So obviously BNPL fits into that bucket quite nicely. |
| 00:04:52 | DT: | And maybe a good place to start when we talk about this is that distant past of the early 2020s and what the regulatory landscape looked like at that time, because this was a category of credit product, well, not according to the code at least, but it was a financial product that was largely unregulated by the National Credit Code and the Act. |
| 00:05:10 | KS: | Yeah and I think that’s something that particularly over the last, if I say 2019, 2020 has gotten a lot of attention for that fact alone, this notion that it’s an unregulated product, so therefore as a result, there’s this assumption that it must lead to an inappropriate or unforeseen outcome for consumers but I think what often gets missed in the reporting is that it’s unregulated to the extent that we’re talking about the Credit Act and the application of the Code, but there’s a lot of other law that will apply to BNPL providers and protect customers who use BNPL products and I just think that sometimes gets lost in the wash of the conversation around the regulation of BNPL. |
| 00:05:47 | DT: | We’re saying unregulated by the National Credit Code, but of course, the Australian Consumer Law, a whole raft of consumer protections that apply to goods and services generally, of course, continue to apply to buy now, pay later products. |
| 00:05:59 | KS: | Exactly. And so I think that’s a really important point to say at the outset that there has, from the very start of the very first use of what I call modern day BNPL provider, that’s always been a framework that’s been in place but I think the discussion, if you like, around BNPL, and I think just the fact, I suspect a lot of policymakers were probably taken aback by the speed and growth and the scaling of BNPL as a product. It really started to surface in some of those policy conversations around 2018, which was when ASIC started to do its first review into the structure of the BNPL industry and published a review that year and since then we’ve had a succession of different government initiated inquiries, looking at the sector. It’s been discussed in parallel inquiries into customer hardship, financial vulnerability. It’s been raised in inquiries into sort of digital payments and mobile wallets. So the product itself and what it does intersect with a lot of other policy areas that I think we’ve been grappling with over the last five years and certainly COVID really accelerated that. We then had AFIA, the finance industry association, come out and establish its own BNPL voluntary code for players in the BNPL space. And then if we fast forward now, we’ve now got a situation where the government has started to and did commence a very detailed period of consultation around how to then bring BNPL within the remit of the Credit Act, which I’ll use the short phrase of Credit Act, I’m talking about the National Consumer Credit Protection Act and you know, at the very start of that consultation, it was really about putting out some options for regulation and from a policy perspective, trying to understand what’s going to be the optimal model to regulate this product, acknowledging that a BNPL line of credit is a very different thing to a home loan or a secured loan, even a credit card, a car loan. So it wouldn’t be appropriate, I don’t think and clearly the government thinks that as well, to just jump in and say, “we’re just going to apply a one size fits all regulation to this sector. We’re just going to apply what we’ve already got.” It was a reasonably slow-ish consultation process as we worked through those different options and then we got an announcement last year, it must be, coming on 18 months ago now that we were going to have this middle ground approach to regulating BNPL where yes, it will come within the net of the Credit Act, yes, if you’re a BNPL provider, you’re going to need to have a credit licence but there is going to be some modifications to the obligations that you’ll have as a credit provider and particularly in the space of responsible lending, which we can come to talk about and then since then, we’ve seen the Bill’s been introduced into parliament. It was introduced, I think in June this year. So it made its way through the house fairly quickly, but we’ve now had it sitting in the Senate for a little while. Obviously the government’s got a lot of political priorities with bills that are in parliament at the moment leading into the election next year, but we’re hoping to see that pass before the end of the year. So it’s about a six year journey. We’re talking about to get to where we are. |
| 00:08:53 | DT: | Yeah, absolutely. I mean, I think Stephen Jones talked about this as the kind of “looks like a duck, quacks like a duck, walks like a duck” sort of legislation about 18 months ago and yeah, I think that consultation started in 2022. So when we’re often talking about participants in law reform processes and parties that make submissions to law reform processes complaining about the lack of adequate time to consider proposals, white papers, prepare submissions, we certainly didn’t have that here. It’s been a pretty comprehensive process. Before we go on to talk about the provisions of the draft bill, maybe we should talk about why buy now, pay later falls outside of the scope of the National Credit Code right now because for anyone who hasn’t used the product or is unfamiliar with how it works, essentially, the structure of the product is that if I want to buy a new pair of boots, and they cost $400, and I don’t have $400 in my bank account right now, I can use a buy now, pay later provider to buy those, and I’ll repay my buy now, pay later provider in four equal payments of $100, and there’s no further cost to me so long as I make those payments on time. There might be a fee payable on default, if you like, if I fail to make my payments when they’re due, but otherwise I’ve only paid the $400 that I would have otherwise paid on day one over four weeks. Now, if I took that model and I said, well, instead I’m going to pay that $400 back after four weeks time, plus 8% interest on that $400, that would be a regulated product, but the first scenario is not. Why is that? |
| 00:10:24 | KS: | Yeah. So this comes down to the existing provisions in the Credit Code. So the Credit Code’s, the schedule to the Credit Act, which defines what the provision of credit is to which this code and therefore the Credit Act applies and there’s a couple of key points to note with that. So the first is there’s three or four limbs, if you like, to when credit is going to be regulated by the Code but one of those limbs is that a charge is or may be made for providing the credit. To your example there, that’s the first hurdle and that is some BNPL products and providers have set up their product so that there is no fee or charge payable for providing the credit unless we get to default. So, in that model, they’re not even meeting the definition of credit for the purposes of the Credit Act and therefore don’t fall within the regulatory bounds. Then you’ve got other providers who do charge a fee or some other charge for providing the credit, but they’ve structured their product so that it fits within, there’s a couple of existing exemptions to the definition of ‘credit’ and therefore credit to which the Code applies. One is what is sort of generally called the short term credit exemption. So that’s credit that is limited to a period of not more than 62 days and it has a maximum amount of fees or charges that can be imposed of up to 5% and a couple of other criteria. So some structure their products so it fits within that short term credit exemption. Again, that means they’re outside the definitions and therefore the Credit Act doesn’t apply. And then there’s other providers that rely on another exemption, which is the account charge exemption, the 6(5) exemption, which is, yes, we provide credit, yes, we impose fees and charges for that credit but we don’t exceed the maximums that are prescribed currently in the regulations and those maximums have been around for decades. So that’s another issue that I think the government needs to face into and that is those caps are just not appropriate for current day and we need to look at those from an inflationary point of view and also just indexing for cost of living and other variables but that imposes maximum caps of $200 for the first year and then $125 thereafter. So then you’ve got providers that design, you know, an account keeping fee or some other regular fee or charge that then still sits within that maximum fee cap. And that then keeps the product outside of the regulation of the Code and therefore the Credit Act. So there’s a couple of different ways that you can structure and, you know, all of the BNPL products in market will be doing one of these things if they’re unregulated and these exemptions and the way in which the Code is cast with these definitions has been in place for years, certainly since the Credit Act has been in place but then the code or the UCCC, the Uniform Consumer Credit Code, that was in place before our current Credit Act had similar exemptions. So these are not new exemptions. These were not introduced to support BNPL. Certainly they’ve been in here for a very long time predating by many years, if not decades, BNPL, but it’s an example where perhaps the law hasn’t really kept pace with innovation, hence why the government is now looking at, well, what’s the right policy settings to now regulate these products? TIP: If you’re not familiar with how consumer credit is regulated in Australia, here’s a quick primer. ASIC oversees a unified national consumer credit framework established by the National Consumer Credit Protection Act 2009, and that includes the National Credit Code, or the NCC, at Schedule 1. The Act and the Code replace state based consumer credit regulations and they govern Australian credit licence holders federally. The National Credit Code applies to credit contracts entered into on or after the 1st of July 2010, where the lender is in the business of providing credit, a charge is made for providing the credit, like interest or fees, the debtor is a natural person or a strata corporation, so not corporate borrowing, the credit is provided wholly or predominantly for personal, domestic, or household purposes, or to purchase, renovate, or improve residential property for investment purposes, or to refinance credit previously provided for this purpose. You can see some parallels in that test of personal, domestic, or household purpose for the loan and the Competition and Consumer Act and the Australian Consumer Law as a schedule to that act. Certain loans are also exempt from the code even if they do meet those requirements. That includes low cost, short term credit contracts, including arrangements that have a term of under 62 days, or 2 months, which, as Kerensa said, means that most buy now, pay later arrangements currently fall under that exception. Also, buy now, pay later products generally fall under the exemption for interest free credit contracts under section 6(5) of the Credit Code, which permit periodic or fixed fees for credit provision within prescribed limits. $200 in the first 12 months and $125 for each subsequent 12 month period and that means that most buy now, pay later providers charge service fees like account establishment or maintenance fees but not interest in order to align with that exemption. And if those charges are fixed charges that don’t vary according to the amount of credit provided, those arrangements are also exempt from the National Credit Code. As a consequence, most buy now, pay later providers at the moment aren’t required to comply with responsible lending standards or their other Credit Code obligations and providers aren’t required to hold an Australian credit licence. |
| 00:15:23 | DT: | This is a law podcast, not an economics one but since you mentioned the inflationary considerations around some of those caps, I do think it’s fascinating to watch the buy now, pay later industry and what’s going to happen following this regulation because this product design really came into existence in an extremely low interest rate environment where this design of product where consumers were charged either fixed fees and charges that were not referable to an interest rate, or in some cases, as you say, no fees and charges at all, simply relying upon the merchant fees, because of course, that’s the other part of this product, buy now, pay later providers are processing these payments and are charging merchants for that service. So you might wonder, well, how on earth do the buy now, pay later providers get paid if there’s no default? Those merchant fees are part of the story but this product came into existence when in such a low interest rate environment, there was a demand on the part of parties seeking to deploy capital to deploy that in a way that wasn’t referable to an extremely low interest rate. We’re in an inflationary environment now where interest rates are higher and so on the one hand, these products are much more attractive to consumers who are trying to use products that aren’t pegged to a higher interest rate, like their credit cards, but on the other hand are less attractive to the parties providing the capital that sits behind these products. So I think it’s really interesting to see how the dynamics of this will change. You know, we’ve got an increase in demand for buy now, pay later products, presumably, we’ve seen that in the 2022 financial year, certainly, but also an increase in supply of capital for new buy now, pay later providers into the market. I wonder if we’re going to see a bit of a concentration over the next little bit. |
| 00:17:05 | KS: | Yeah, I think like any sector where there’s an economic upturn, downturn, that always drives consolidation because you’ll have some that survive through that, some that don’t and I mean, we’ve seen that with some providers post-COVID that withdrew from Australia for various reasons, one of which was funding costs and those sorts of pressures, two was inability to scale to the right level and in Australia, that’s always going to be a challenge where reasonably small population compared to America, which is another big jurisdiction for BNPL. So there is always going to be, I think, that competitive challenge of scaling and to support the business, but going forward, I think, you can look at the regulation of the sector under the Credit Act in one of two ways. One is it does create a degree of a level playing field now where anyone who wants to provide this product is starting from the same position, it’s not a matter of choosing which exemption you’re going to rely on and how you’re going to strike the first fee side of your product. You sort of almost require to, now, all line up and offer your product in a particular way and you’re subject to the same parameters around the setting of fees or interest or whatever it is. So I think there’s a level of consistency there which I think is helpful for customers, but also if you’re a provider that’s looking to come into the market in Australia and looking to understand what that regulatory dynamic’s going to be and how much pressure that might place on the business, I think this again does create a level of certainty to understand this is what I need to do, what I need to do is the same as everyone else, which is a little bit different to now because some BNPL providers already have a credit licence. Some are already offering a regulated product. So I think there is always, overall, some benefits to be gained by regulatory consistency. |
| 00:18:45 | DT: | Yeah, absolutely. I remember advising startups looking to enter this space years ago, and that advice would sort of cover, “oh, well, there’s this way to structure the product. There’s that way to structure the product.” There were a lot of options and a lot of variation in the market, but this looking at the substance over the form, walks like a duck, quacks like a duck heuristic to the way the new bill is going to work does mean that we’re going to have some uniformity. To the way products in this space are marketed. Well, let’s talk about that approach in the draft bill. The draft bill will classify buy now, pay later services as low cost credit contracts, LCCCs. What’s a low cost credit contract under the Bill? |
| 00:19:22 | KS: | Yeah. So maybe to set up the answer to that question. So we just spoke about how the current products work today. And so they’re all relying on various different exemptions in the Code or the fact that they are not charging a fee for providing the credit. So, don’t even meet the definition of credit to begin with. So going forward when amending the Bill, Treasury needed to solve for that existing dynamic. So what they’re doing is basically saying “we’re introducing this concept of a low cost credit contract, we’re going to disregard these sets of exemptions that already sit in the Code. So to make these things work together, almost forget that there are these existing exemptions that everyone’s relying on today. And now we’re going to have this concept of a low cost credit contract.” So what that is, is a contract where credit is or may be provided under it, obviously that goes without saying. Then it must be either a BNPL contract or another contract prescribed by the regulations and so obviously for these purposes, a BNPL contract is the key. That’s the hook to bring the providers into the existing regime and providing this, principles-based drafting, so that these provisions can be future proofed if some other form of unregulated credit pops up that the government thinks ought to be brought within the remit, they can do that by exercising this regulatory power. Then there’s a set of other hurdles in the definition of low cost credit contract, which largely then does marry up with the criteria for these existing exemptions. So the credit under a low cost credit contract is or may be provided for a period that doesn’t exceed that stated in the regulations. The contract for the low cost credit must satisfy other requirements prescribed by the regulations relating to fees and charges, which includes interest and default, which is a really important point, and that it satisfies anything else that sits in the regulations. So really what this is doing is setting up this principles based concept of a low cost credit contract in the law. And then relying on the supporting regulations to essentially pad that out. And we’ve seen a very early draft many months ago of what those regulations are proposed to be. And it is really trying to mirror a lot of these existing principles. So it’s bringing in those fee caps. I spoke about, the $200 for the first year, 125 thereafter. It’s bringing in some caps for default fees, which is new, which we don’t currently have. And. I understand there’s been a lot of discussion and consultation by industry and the government on those regulations in the background. We haven’t yet seen the final version of those, but those are obviously going to be really key because that’s ultimately going to determine how we interpret a low cost credit contract. And for a BNPL contract, what’s the structure for the fees and the interest and the default fees that they need to now move to comply? I’ll just say one thing about the BNPL contract concept, which is another defined term. So a definition within a definition, and it is essentially defined as what we all understand a BNPL contract to be today. So that’s a contract that’s part of a BNPL arrangement, which is the contract between the BNPL provider and us as consumers for the provision of credit to acquire goods or services from a merchant. So it’s, again, those three parties that come together under various contracts for the flow of goods and services and then the payment of those goods and services. So that’s just reflecting really how the model works today. |
| 00:22:31 | DT: | Yeah, absolutely. Thanks for that primer and we’re going to talk a bit more about the fee and the charge limits in a moment. Absolutely. TIP: Since we recorded our episode with Kerensa, the Treasury Laws Amendment (Responsible Buy Now, Pay Later and Other Measures) Bill, actually passed on the 29th of November with slight amendments from its reading in the Senate. The Act modifies the National Consumer Credit Protection Act and the Credit Code to regulate what they call low cost credit contracts, which include buy now, pay later arrangements. The new regulatory framework aims to preserve consumer access to low cost credit contracts, like buy now, pay later, while ensuring proportionate protections through the following measures.
That’s a big change. Previously, buy now, pay later providers specifically considered how the consumer credit code would apply to a new product and designed the product in such a way to ensure that they wouldn’t be caught by responsible lending obligations or licensing requirements. I do think the drafting of this is really interesting though, because as you said, the way it’s drafted is, well, this Code applies to a buy now, pay later contract if the Code would apply to it if you just ignored these sections of the code, right? It’s not changing the definition of credit or repealing those exceptions. It’s saying, well just ignore section 5(1), just ignore section 6(1) and ignore section 6(5) and if you pretend they don’t exist and apply this imaginary alternative version of the Code, then the Code applies to a buy now, pay later contract. It’s a really interesting way of drafting that I haven’t actually seen before in any other legislation. |
| 00:24:26 | KS: | Yeah. And I think part of that, and you might remember when we first saw exposure drafts, there was some placeholder words in there saying basically the government’s taking advice around how to make all this work and I think part of the reason it’s cast this way and they needed some time to figure that out is, you remember before we had the National Credit Act, the regulation of credit was with the states and territories. It was a state based law, and states and territories had the power to regulate it. When states and territories referred that power and agreed to refer that power to the Commonwealth, that came with it some constitutional considerations, which at the time, very complicated but it all worked out. And so I think now when you’re looking at bringing other products into the definition of credit and trying to make all this work alongside the parameters for that referral of power from the states to the Commonwealth, that has largely driven, I think, this slightly clunky way of bringing in these BNPL products into the Credit Act and making it very clear that they are credit without compromising any of the additional words in the Code and the Act that really reflects that referral of powers from back in 2007, 2008. |
| 00:25:34 | DT: | Interesting. I think that’s an interesting point of history. I don’t know that it’s necessarily that clunky. I kind of like it because if you’ve been following this industry and the way in which it’s regulated or largely unregulated for a little while. It’s actually quite clear in the intent of the legislation, right? It’s very clear in carving out the exceptions that we’re all familiar with, right? |
| 00:25:56 | KS: | I think so. I think you’re right. For those of us who have been around this space for a while and know the story and know why we are going down this path, we can navigate ourselves through it and it makes sense but whenever something like this comes up, and we’ve seen it with other reforms the government’s pushing through at the moment as well, if you try and apply a lens of someone who’s never picked up this law before, and then try to make sense of it, it is a bit of, “why are we disregarding this and what about that?” It is not as intuitive as it perhaps could be but again, I think, that’s not the problem we’re solving or the government’s solving for. The problem the government’s solving for is to bring in all of the existing players into the net, so to speak and as you say, I think the existing players are all across these different levers that need to be addressed to make this work. |
| 00:26:37 | DT: | Yeah. It’s that perennial problem with drafting legislation or drafting anything, I guess, which is, are you drafting for the audience of buy now, pay later providers themselves seeking to understand the legislation without the benefit of legal advice? Are you drafting for a generalist subsection of the profession who don’t have a specialisation in this area? Or are you drafting for a hypothetical professional well acquainted with the position at law before the introduction of the Bill? So no right answer there, but let’s get back to, kind of the substance of the Bill. And I’d like to start first with the licensing requirements. So, as you said, some buy now, pay later providers already have credit licences, they offer regulated products as well. Many do not. What impact do you think the new licensing requirements will have on some of those buy now, pay later providers who are unlicensed? |
| 00:27:23 | KS: | Yeah. So, how you thread the needle on all of this is if bringing BNPL within the definition of what is credit under the Code then links into credit activities and therefore triggers the licensing requirements. So if you’re someone that’s engaging in a credit activity, which is providing credit, you need a credit licence unless there’s an exemption that applies. What do I think the impact will be? Well, as you say, some of the larger providers already have a credit licence, have gone through that process to secure that with ASIC. Others haven’t. For those of you who haven’t been through that process to get a credit licence from ASIC, it is a reasonable amount of work. It does take three to six months, conservatively. It does require some money. You’ve got to obviously pay to apply for the licence, but also, operationally, it’s quite an investment because in looking to apply for a credit licence, ASIC needs to be satisfied that you’ve got essentially your house in order. You’ve got your compliance framework in place. You’ve got policies and processes to support your general conduct obligations and other operations to support the provision of your credit activity and supporting customers who take out credit with you. They need to be satisfied that you’ve got the competence and that comes with responsible managers that need to have the requisite level of experience in regulated credit. You need to obviously have insurance. There’s a lot of steps involved in getting the credit licence that is a significant startup investment, particularly for smaller credit providers. And then if you get that and you get your credit licence and you’re regulated, there’s that ongoing compliance cost and ongoing operational cost in maintaining your compliance with all of the obligations that engage when you are a credit licensee. So I think most people would have heard “efficiently, honestly, fairly” is the conduct obligation that’s talked about a lot at the moment, but there’s a bunch of other conduct obligations. You need to be a member of AFCA. There’s a whole process that you need to have to support customers in hardship and have internal dispute resolution processes. So it really does formalise all of those consumer protection mechanisms that perhaps if you’re playing in the space today and you don’t have a credit licence, you might have had some, you might’ve had modified versions of some of these things, but this now requires a high degree of focus and a high degree of focus on your compliance practices to ensure that you’re going to be able to maintain your credit licence and importantly, in this space, the big sort of tipping point is around responsible lending because as a credit licensee in this space, you must comply with the responsible lending obligations in the Credit Act. And of course, if you’re not currently regulated today, you don’t need to follow those specific obligations. So I think the biggest challenge is the compliance cost and just the resources that you need to support this but the other big challenge is with compliance comes friction and this is a space where BNPL has been able to develop and scale a reasonably frictionless experience for consumers, which has been fantastic in terms of the product and the ease and the simplicity of what the product does, but introducing these new obligations inevitably is going to introduce some friction to that process and so there’s going to need to be a period of adjustment for everyone when that happens. |
| 00:30:29 | DT: | Yeah. And I suppose detractors or critics of the buy now, pay later industry would say that that frictionless product experience, which startups aspire to, maybe that process needs a little bit of friction that some consumers have used buy now, pay later irresponsibly against their interests have spent money that they don’t have precisely because there’s very little friction to that process, they can leverage that low cost credit contract without the great deal of thought or disclosure or consideration to their detriment. So, I can see the argument there. Now, under our credit licensing regime, it’s also possible to operate under the auspices of an existing credit licence holder as a credit representative. And we often see in financial services businesses that new financial services businesses may operate as a financial services representative under the auspices of a more established licensee to decrease that time to market, I suppose, while they’re undergoing that pretty stringent and lengthy process to obtain a licence of their own. I’m thinking about the 2021 transaction between Afterpay and Square, a bit of a vertical integration in the market where Afterpay – buy now, pay later provider – was acquired by Square – a merchant payment systems provider. I wonder whether we’ll see this integration, whether that’s vertical integration like we saw with Afterpay and Square or just a increased co location of licensed services and unlicensed services, whether some of these buy now, pay later providers will be acquired by or develop closer relationships with the kind of service providers who are already licensed to provide credit services. |
| 00:32:03 | KS: | Yeah, I think it’s possible. I mean, that’s a trend that we see from time to time, a party that’s interested in coming into a particular sector and rather than going through all of those hoops I just spoke about to get a credit licence, they just try and find a company that already has that credit licence and acquire them and so you can’t sell a credit licence, but you can buy, obviously, the shares in a company that already has it. So I think there may be a little bit of that that happens going forward, particularly with new entrants who don’t have six months or don’t want to sit around and wait six months to go through that licensing process with ASIC. And I should say that’s six months now. I mean, going forward with all of the other regulatory changes that the government’s proposing, both in financial services licensing and credit licensing, I’d expect that timeline is going to blow out quite a bit. So the concept of coming in and finding an existing entity that holds a licence with the right authorisations and looking to just buy that to streamline that entry, it’s certainly not going to be something that decreases and it’s a bit of a lift and shift. You’ve got a company that’s all set up, it’s got all the policies in place, ASIC is satisfied that they’re doing what they need to do to run that credit business. It’s pretty easy, I think, if you’re an entrepreneurial business to see that as a cut through way to just get established in Australia. |
| 00:33:13 | DT: | Absolutely. Now, let’s talk about the fee and charge limits coming in under the new draft bill. Tell me a bit about those. How significant are these changes going to be for consumers? Are they going to notice these changes? |
| 00:33:24 | KS: | They might notice some changes, but I don’t think that they’ll understand why those things are changing. So I think there’s a few things that need to be worked through. One is transition. So how are we actually going to transition in these new requirements for the couple of million people that already have a BNPL product today but secondly, I think what it is going to do is for some certain customers of certain BNPL providers, it is going to change, I think, in a good way, how much they pay for their product. And I say that particularly from the perspective of the new caps for default fees, which as I said, are not part of the limits today. So certain providers, as you said, that’s how they will make their money. They will wait until a customer goes into default and start to impose fees at that point. So I think those providers will have an adjustment because that’s a change to their business model to introduce those caps. I think for other providers who are relying on the 6(5) exemption – so this is the $200 and the $125 caps – that today is mirrored in the draft regulations and so that should just continue. So in terms of the fees that a customer pays for their product today, they will be struck and calculated based on those caps. So unless something moves on those caps, I know there’s been a lot of submissions made that those caps need to be lifted to deal with all of the inflationary pressures and just general operational costs have obviously increased in the last couple of decades, they need to be adjusted for that. So consumers might see a little bit of adjustment on an account fee or something, but by and large, probably not much else. The big change for some will be once this all gets caught within the net of the Credit Act and the Credit Code, it’s really what I’d call the back end that starts to change a bit. So that’s if you’re in hardship, for example, you’ll then be captured in the formalised hardship processes that sit within the Credit Code. If you’re in default and the lender is wanting to enforce the loan against you, there is a machine in the Credit Code that sets out the steps that they need to follow to enforce that default. So I think, yes, there might be some changes for certain people with certain lenders on the fee side. Some might not notice anything different, but if they get into default, that’s where I think we will start to notice some changes. New customers that come in post-commencement of these changes will probably notice a difference to the origination process because this is the change to formally inject the responsible lending obligations. So the frictionless experience, and I use that term just to conjure up the image of; you get your app out, you open one provider and you apply on the spot, generally speaking, it’s a pretty quick process. There will start to be a slowdown. I imagine of that process because providers will need to, probably, ask a few more questions about you and your income and expenses and do a couple more checks than what they perhaps do today. And like any credit product, we’d all know trying to apply for a credit card or a home loan, you do have to sit and wait a little while, while that process makes its way through. |
| 00:36:22 | DT: | Yeah. And we’re talking here about the obligation to make reasonable inquiries about amongst other things, the affordability of the low cost credit contract that the consumer’s entering into. There’s that magic word that appears so often in our system of laws; ‘reasonable’ and there are some factors to consider under the new bill for whether inquiries are reasonable. That includes the amount of credit being provided. So in my earlier example of buying a new pair of boots, maybe you don’t have to make quite so many inquiries about a $400 low cost credit contract compared to say a $4,000 low cost credit contract. And that also folds in, I suppose, a few additional regulatory instruments that have been brought in over the last few years or the last half decade, I suppose, because one of those things to consider in making reasonable inquiries is where there’s a target market determination for that consumer or that market. So, we’ve been talking about this idea of frictionless experience and a key focus of the reform is to protect vulnerable consumers, consumers who may have used buy now, pay later services to their detriment and who may arguably would not have used those services had there been responsible lending checks in place and a catch word or key theme around the discussion of this legislation is proportionate regulation for buy now, pay later products, balancing the rights of consumers, particularly vulnerable consumers and an innovative financial product industry. Do you think the proportion has been struck correctly here? Do you think this is an adequate or the right balance between consumer protection and protecting innovation in the industry? |
| 00:38:04 | KS: | So, this is a really interesting question because today the responsible lending obligations in the Credit Act are already principles based and they’re already scalable. So the Act today for anyone who provides credit and is a licensee has the same obligations. So you need to take certain steps to make reasonable inquiries about needs and objectives and financial situation, take reasonable steps to verify that financial information and then you separately need to make your unsuitability assessment. So that’s all expressed at a very generally high level. And we’ve got cases that have said exactly that the law does not prescribe the steps that you need to take or what you should do, except to say what you do is reasonable. So your lender needs to decide based on your product and your customers, what is going to be reasonable. So that’s the starting point. When this exposure draft legislation came out and introduced this concept of modified responsible lending obligations, and so it’s saying, “well If you’re a low cost credit provider and you’re providing BNPL contracts, you can opt in or make an election” is the terminology that they’re using. “You make an election to apply instead these modified responsible lending obligations.” And so there’s been a lot of noise about the streamlined modification, proportionate approach to responsible lending, recognising the reasonably low limits for BNPL and the struggle, I think, I and other lawyers, have about this concept is I’m not sure there’s a problem to be solved with the obligations that attach for responsible lending. The obligations that you must follow for responsible lending are already scalable, arguably can already have proportionate application, because the courts have said, “well, it’s over to you lender to figure out what’s reasonable for your customers.” And so I feel like this is a solution looking for a problem, if that makes sense. So the modified responsible lending obligations, if you do make that election to opt-in to them, is, yes, as you say, it starts to introduce a little bit more prescription about the matters that you must take into account in making your inquiries and verifying certain information. And again, at the moment, the Bill itself sets out those relevant matters and the things that you must have regard to. And as you say, it’s things like, is there a target market determination in place, which is interesting because without digressing too much, when the DDO regime was introduced, the government was at pains to say, distribution and the DDO doesn’t replace responsible lending, but they can work alongside one another. So the mere fact that there’s a target market determination in place, I’m not sure why that’s necessarily relevant to assessing, making inquiries and verifying information but, anyway. TIP: Now, as Kerensa said, before these amendments were enacted on the 29th of November, buy now, pay later arrangements weren’t completely unregulated. Since 2021, buy now, pay later providers have been governed by design and distribution obligations under the Corporations Act, which apply to financial products, including an expanded definition of financial products in the Australian Securities and Investments Commission Act. Basically, when designing or distributing a financial product, operators need to consider the needs of the intended consumer base. Issuers can’t just offer a product without first identifying an appropriate target market for that product – the class of people for whom it would be a useful and appropriate financial product – and they have to take reasonable steps to ensure that distribution of the product aligns with that target market. Both issuers and distributors need to have governance processes throughout the product’s lifecycle to cover things like product design, distribution, and that includes not just the initial design and distribution of the product but also the monitoring of outcomes, whether the product is being distributed to that target market or not. Both issuers and distributors have a reasonable steps requirement under the design and distribution obligations. It involves documenting decision making processes to show compliance and issuers have to create what’s called a Target Market Determination, or TMD. They have to review the suitability of the target market determination every now and then, they have to keep records and they have to inform ASIC about significant transactions related to the target market determination. Distributors on the other hand have to avoid retail distribution without a Target Market Determination from the issuer and they have to collect and provide distribution data including ensuring that the distribution practices align with that Target Market Determination and notify issuers of financial products of any major inconsistencies with the Target Market Determination. For example, if a buy now, pay later provider has decided that the target market for a new product are consumers with a particular income above a certain threshold and they find that a lot of people with income below that threshold are being supplied with that product, they need to be providing that data to the issuer so that can be recorded and monitored and, if necessary, notified to the regulator. The Design and Distribution Obligations also equip ASIC with the ability to issue stop orders if credit providers fail to comply with their Design and Distribution Obligations. So the amendments to the National Credit Code are just part of the process broader framework that regulates buy now, pay later providers in 2024. But I think the real crux of this is, and I think this is probably more, I don’t want to use the word optics, but I think what it’s doing is really making it clear that vulnerability is at the forefront of these reforms because as you said, one of the matters that a lender must have regard to is whether the consumer is financially vulnerable, whether the licensee has any procedures in place to reduce the risk of providing credit to a consumer on terms that aren’t affordable and whether or not the licensee has procedures in place to mitigate harm that may be caused to a consumer if they’re provided credit on terms that are not affordable to them. Now, we can go down a rabbit hole and talk at length about how at the point of origination you would assess or determine whether a consumer is financially vulnerable, what would that look like, what information might you need, but I think the message that’s sending quite clearly, if you look at purely from a statutory interpretation point of view, the message and the objects is quite clear and that is, we want you as a lender to take steps to ensure that you’re not lending to customers who are vulnerable or if you do inadvertently or a customer subsequently becomes vulnerable because they’ve lost their job or they’re suffering some other hardship, we expect and require you to have certain policies in place to deal with that. And I think that really is the crux of this reform and we can argue and debate whether or not, as a matter of law, that is strictly necessary but I think what it does do is really crystallise that object’s focus for this reform and quite clearly the object is to try as best as we can to guard against situations where you’ve got financially vulnerable customers taking out credit. and just in this context, we’re talking about BNPL taking out credit that they can’t afford. And so I think that these modified obligations do help to be very clear on that object. |
| 00:44:54 | DT: | Well said and that’s an important clarification that you made there, Kerensa. The factors that I was describing come from, I think it’s part 3-2BA maybe something like that, but the voluntary section that you can elect to opt into as a buy now, pay later provider that yes, modifies some of the part 3-2 rules to, if you like, codify them to a greater degree and I think it’s interesting what you say there that maybe that codification is a little unnecessary. I wonder if it came out of a submission in that lengthy consultation process to the effect of, “oh, well, how are we to know what the application of part 3-2 looks like to this sort of product? It’s too uncertain.” And so the policy response is, “well, fine, here’s a code that you can opt into if you like.” |
| 00:45:39 | KS: | Yeah, and I mean, look, this is not a political podcast but of course, there’s lots of different stakeholders that need to be heard in the context of any regulatory reform and absolutely this is no different. So of course, the government has heard a lot from consumer groups and financial counsellors and others that spend all of their time seeing customers in various states of vulnerability and experiencing harm. So they’re going to have very persuasive case studies and concerns with how this law is crafted. And absolutely the government needs to take that into account. Equally, they’re going to get very extensive submissions from no doubt the existing providers who have the benefit of all of their data and all of the insights they’ve got around their own customers behaviour to maybe argue or counter some of those concerns and so like any policy process, both of those sides need to be distilled down into some middle ground and so query whether it’s needed at all, but the point is that’s the process that must be followed in any sort of good policy process or any good lawmaking process and so we’re left with this. And I should say, like a lot of the amending bills we’re seeing at the moment, there’s the catch all of “here are all the matters you must take into account, plus anything that’s in the regulations.” And so, again, we haven’t seen those final regulations, but what it does introduce, currently the draft that we saw earlier in the year, two important things, undertaking some additional inquiries and searches around credit information and then also making some additional inquiries about income and expenses of the customer, which is a trimmed down version of what the existing requirements are for making inquiries of financial information. |
| 00:47:11 | DT: | And just to cover off on one point you made there, Kerensa, you mentioned the DDO obligations. That’s the Design and Distribution Obligations that came in in 2021 from memory. And we said at the top of the episode, it’s a bit of a misnomer or a bit of a mistake to say buy now, pay later is unregulated because of course, when we say it’s unregulated, we’re referring to the National Credit Code, not a range of other obligations and laws that apply to buy now, pay later products and their providers. The DDO obligations are one such example of that. Without going back to 2021 and talking about all of that, the Design and Distribution Obligations require providers of financial products and financial services to design those products and services for a particular class of consumer and make a determination about who their products are suitable for, and do things like when they provide that product to someone who’s outside of that suitable market, make a note of that and notify it. And that is an obligation that does already apply to buy now, pay later products. |
| 00:48:06 | KS: | Yeah, that’s right. The key one there is the taking of reasonable steps to direct distribution to your defined target market. There’s obviously a spectrum of how you cast your target market but absolutely those laws started, I think, October 21, they were delayed because of COVID and other things but they’ve been in place for now three years and ASIC has been really active in the DDO space and so there are already a number of protective measures in place for customers of BNPL quite before we get into this new world of bringing it within the Credit Act. TIP: I mentioned Target Market Determinations briefly a moment ago. A TMD is a mandatory document that has to be made available to consumers before a financial service provider engages in retail product distribution conduct. It defines the target market, the consumer segment for whom the financial product is suitable and appropriate, along with distribution parameters and review periods to maintain its relevance and compliance. To date, ASIC has issued 89 stop orders for non-compliance with Design and Distribution Obligations. One of those was a stop order to buy now, pay later service provider Humm in mid 2023. That stop order prohibited Humm from issuing its buy now, pay later product for 21 days and then it was lifted after Humm addressed some of the concerns that ASIC had. Humm’s buy now, pay later product allowed consumers to borrow up to $2,000 for small purchases or up to $30,000 for large items and included a feature for deferring bill payments. ASIC said they had identified some deficiencies in Humm’s target market determination. For one, the target market was too broadly defined, excluding only a narrow subset of consumers who might struggle with payments. Crucially, the TMD didn’t provide adequate details about the bill payment feature or the financial circumstances of consumers likely to use it, making it insufficiently specific in identifying a suitable target market. Also, there were no clear distribution conditions to make sure the product was appropriately targeted to that market. The TMD lacked mechanisms for determining whether consumers met eligibility criteria and it didn’t explain how Humm’s processes would direct the product toward the target market. It also didn’t have any review triggers to monitor outcomes like missed payments. In response, Humm removed its bill payment feature and revised its Target Market Determination. |
| 00:50:14 | DT: | Now, as we’ve said, this has been a pretty comprehensive law reform process. The options paper was published in November, 2022. We’ve had several rounds of opportunity to consult with industry, with the profession, and that options paper that was published way back in November, 2022, took a look at how buy now, pay later is regulated by some of our common law cousins in New Zealand and in the UK. How does Australia’s proposed new buy now, pay later regulatory regime compare to some of those other jurisdictions? |
| 00:50:43 | KS: | Generally speaking, it’s unusual for Australia to lead. I mean, BNPL as a concept is essentially an Australian generated thing. And so we’ve led the charge in developing this product in this industry. It’s now scaled overseas and so I won’t use the word “sadly”, but even despite that, we’ve had other countries now accelerate past us in terms of regulating and making sure there’s fit for purpose regulation. In New Zealand, from what I understand I think providers quite like what New Zealand has done and the approach that they’ve taken to regulating BNPL over there. My understanding is it’s slightly more flexible, so there’s various limits that are littered throughout the bill when we’re talking about making unsuitability assessments and how long those assessments hold for and if there’s a limit that’s in place or if it’s under a certain limit it holds for a period of time. New Zealand has higher limits for those sorts of things, so if you’re a lender that’s obviously more favourable to you and so I think lenders naturally are thinking that New Zealand is probably a better regulatory setting. And like all lawmaking from what I’ve read, New Zealand’s approach was really supported by data. So they did a lot of work, as I’m sure our government has, to interrogate the data around defaults and delinquencies and average limits and average balances and use and all of that sort of thing to figure out what’s the tipping point where we start to see harm. And over there, the tipping point that they’ve established is higher than the tipping point that our government has established here. So generally speaking, New Zealand and Australia consumer behaviours, the economy, it’s all fairly similar and so I think there is a question around, well, if New Zealand has gotten comfortable with that particular regulatory setting, what is it about our customers here and our settings that support taking a different approach. I think that’s a reasonable question to ask. And then in the UK, I think it was only last week, maybe the week before last, that they’ve come out with their proposed approach or their final proposed approach for regulating BNPL in the UK. That’ll be interesting to then put alongside us and New Zealand to see just the differences in approach. And like I said, I think a lot of that has to be come down to the different behaviours of consumers in those countries. The UK is a much bigger market, much higher population. It will have a lot more data and the data’s going to be more diverse and skewed probably because of that population size compared to New Zealand and then Australia sitting somewhere in the middle. |
| 00:53:03 | DT: | Yeah, absolutely. And I think it’ll be interesting to see what the UK does in this space because the UK is regarded as a financial services capital of the world. Its approach to regulating financial services and financial products is highly influential. Of course, we’ve already taken our own approach, but it’ll be interesting to see how the legislation may evolve here and elsewhere, depending on how that regulatory approach rolls out in the UK, especially since we do have that opportunity to make adjustments as so much modern legislation does through little adjustments in the regulations. TIP: So we just mentioned that the UK has released a draft proposal around regulating buy now, pay later providers. In the UK, approximately 14 million people use buy now, pay later services – that’s data from the six months leading up to January 2023. It’s also been found in the UK that frequent users of buy now, pay later were over four times more likely than other consumers to miss payments on other bills and traditional credit cards. In October, the UK Treasury launched a new consultation regarding draft legislation introduced in 2023 to regulate the buy now, pay later market. That consultation ended at the end of November, but the consultation paper didn’t specify when final proposals would take effect, noting implementation would depend on when parliamentary time allows. That said, final legislation is anticipated in early 2025, after which the Financial Conduct Authority, the UK’s equivalent of ASIC in this area, is expected to finalise those rules, with an effective date likely in 2026. The Treasury has proposed to bring third party buy now, pay later arrangements under the FCA’s regulatory framework, requiring firms to seek authorisation under the UK’s Financial Services and Markets Act, again, roughly equivalent to the ASIC Act and the Corporations Act here. The regulation would cover all buy now, pay later agreements with no minimum transaction threshold. However, merchants offering buy now, pay later directly, for example, having an option to pay for something over four installments directly from your JB HiFi or Target, those would be exempt. And the new framework would include a tailored disclosure regime aligning with the FCA’s consumer duty rules. While the proposal is still pretty light on legislative detail in the UK, it’s interesting to compare to how Australia has just recently dealt with regulating this sector. Well, Kerensa, we’re nearly out of time. Before you go, I’d like to finish every episode with a question for our listeners who might just be starting their journey in the law, recent graduates or law students. This has always been a bit of an interesting area of the law for me because it touches on parts of our lives as consumers and businesses that we interact with every day – financial services and financial product law covers things like our mortgages, our afterpay accounts that we use to buy our new shoes, all sorts of things. If you had a word of advice for a listener, as I said, a graduate or a law student who wanted to enter this area, wanted to learn a bit more about financial services law and how to practice in it, what would that advice be? |
| 00:55:47 | KS: | I’ll start from the beginning. This is something that comes up a lot in our firm and what I’ve observed over particularly the last sort of few years is that law students come out of university and they’ve done the same set of subjects that I did at law school nearly 25 years ago, like, there’s been really little shift in all of that and there’s been a few changes in the elective selection, but again, not huge. And so you have people still coming into legal practice that, you know, have done property, done contracts, done civil procedure, done admin, done constitutional law, but rarely have they done it had the opportunity or done a particular subject on financial services regulation. They might have done a bit on the Corps Act. So it’s really this black hole that sounds very serious and very grown up and I think there’s a level of nervousness that, “oh God, I don’t know anything about that. Even though I think this is quite an interesting area and I’ve read about BNPL and I’ve read about payments reform and that all sounds good. I’m not sure I have the skills to do this.” And what I would say to anyone, and I’ve said this on another podcast I did, and I say this to all of the grads is that actually doesn’t matter because if you have a natural interest in the product or the sector, or you’ve interested in the way business works in that space, that’s the main thing. Understanding how the law works in this space is just applying all of the skills that you were taught at university around statutory interpretation, principles of contract. You just apply all those skills to this subject matter and this area of law and so it doesn’t matter if you’ve never cracked open the Credit Act or you’ve never cracked open the Corps Act. It’s the same stuff. It’s the same application. You’re just dealing with the subject matter that’s slightly different. And so what I would say is if you are looking around and think that this is actually an interesting and dynamic area of business, I would also say it’s an interesting and dynamic area of law as well because it’s always changing – that’s what I find so fascinating is that you sort of never get to that utopia or that pinnacle where you think I’ve got it. I know absolutely everything there is to know about this area of law because it constantly changes and as a result, even after, however many decades, you still are always engaged and always interested in what’s happening. And so I think if you are someone that naturally likes that, likes to be challenged, likes the technical detail of the law, is interested in just commerce and what’s happening around the place and just the movement of money, this is absolutely a great area of practice. What I would suggest is if you do have the opportunity to do a clerkship or an internship or some sort of voluntary on the job placement, and if you’re interested, always try and ask if you can do a stint in the financial services team or the corporate team that does that, or the banking team that does that and start to get a feel for what does that work look like because again, you don’t get to see that at law school. You don’t get to actually see, well, what does the work entail? And don’t be afraid to ask questions because it is a complicated area. No one has all the answers all the time. So I’m very confident that a question that you’re asking won’t be a stupid question and it won’t be intuitive and you’re right to be raising it. And then just seek out the opportunities. I mean, you’d be surprised how often financial services issues come up across all different types of legal practice and in all sorts of different ways. And so even if you, for whatever reason, you’re not in a firm that does that work or you’re not placed in an area that does that work, quite often, you’ll just come across scenarios where you do get to be involved in it, whether you’re doing a due diligence in an M&A area and it’s dealing with a FinServices client or you’re in disputes or litigation and you’re dealing with an ASIC investigation in relation to something, those are all opportunities that you’ve got to explore this area of law further. So I would just say, don’t be scared of it. It’s very interesting and you’ll have a long and I think very varied career if that’s a path you want to pursue. |
| 00:59:16 | DT: | There’s so much there I agree with. I think the Priestley 11 that we all study at law school has not been updated in a little while and I sometimes think that there’s a few canonical topics of law that I’d love for new graduates to come into practice with. The financialisation of our business world since the 80s. It would be great for us to teach the basics of identifying a financial product or a financial service. And sometimes I think that the law of security interests as well, the PPSA, just comes up everywhere. That would be a great one for students to be learning as part of the core of their learning at uni rather than relegating all this stuff to one elective in your fourth or fifth year… |
| 00:59:49 | KS: | One elective. |
| 00:59:51 | DT: | That makes all this stuff, yeah, seem a little bit more scary than it is and I think it’s a fascinating area. The popularity of journalists and columnists like Matt Levine in the US suggests how popular it is for people to learn about these arcane instruments, or maybe they don’t need to be so arcane, but these topics that do affect our lives on a daily basis and this topic is a great demonstration of how interesting this area of law can be because I think it’s going to be a fascinating space to watch, as we said at the top of the episode, as we see the economic impacts of an inflationary environment on this market as we see the impacts of increased regulation in this market – fascinating space to watch. So Kerensa, thank you so much for joining me today on Hearsay to talk all about it. |
| 01:00:31 | KS: | Pleasure. Thanks for having me. |
| 01:00:42 | DT: | As always, you’ve been listening to Hearsay the Legal Podcast. I’d like to thank my guest today, Kerensa Sneyd, for coming on the show. Now, if you’re interested in how the law surrounding financial services is responding to novel and innovative financial products, why don’t you check out our episode with Steven Pettigrove on the future of regulating digital asset platforms and cryptocurrency. That one’s episode 122 and it’s called ‘The Future of Finance. Australian Treasury’s Proposal for Regulating Digital Asset Platforms’. If you’re an Australian legal practitioner, you can claim one continuing professional development point for listening to this episode. Whether an activity entitles you to claim a CPD unit is self assessed, as you know, but we suggest this episode entitles you to claim a substantive law point. For more information on claiming and tracking your points on Hearsay, please head to our website. Hearsay the Legal Podcast is brought to you by Lext, a legal technology company that makes the law easier to access and easier to practice, and that includes your CPD. Finally, I’d like to ask you a favour. If you like Hearsay the Legal Podcast, please leave us a Google review. It helps other listeners to find us and that keeps us in business. Thanks for listening and I’ll see you on the next episode of Hearsay. |
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