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ASIC took action against Buy Now Pay Later (BNPL) provider Elevare Pay Easy Pty Ltd, trading as Elepay, for distributing seven credit products to consumers without a Target Market Determination (TMD) between 5 October 2021 and 15 March 2023. ASIC was concerned about Elepay's failure to make a TMD, which exposed consumers to the risk of obtaining a financial product that was not appropriate for their needs and objectives. During this period, Elepay lent $13.748 million to 1,658 retail clients.
Key takeaways
- The TMD must appropriately define the target market for the BNPL product. The target market is the class of retail clients or consumers who share specific characteristics and are deemed to be the "ideal" consumer for the product. The TMD must specify these characteristics and the conditions for distributing the product to "ideal" consumers.
- The TMD should also include distribution conditions and restrictions to ensure the BNPL product is distributed to the target market and not beyond consumers that would fall within the target market. Providers must ensure any third party distributors adhere to these conditions.
- A TMD must be reviewed regularly, including upon the occurrence of any review triggers. BNPL providers should consider the review triggers included in their TMDs, including any triggers which involve metrics about the product being distributed outside of the target market.
If you are a Buy BNPL provider and do not have a TMD in place for your credit product, or would like someone to review your existing TMD, please contact Sophie Grace.
Background
The DDO regime came into effect on 5 October 2021. The DDO apply to a range of financial products under the Corporations Act 2001, ASIC Act 2001 and National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and are intended to help consumers obtain appropriate financial and credit products by requiring issuers and distributors to have a consumer-centric approach to designing and distributing products.
From 10 June 2025 onwards, BNPL products are regulated under the NCCP Act. Providers issuing BNPL products are not only required to comply with the DDO, but also need to hold an Australian Credit Licence. You can find further information about licensing here. While Buy Now Pay Later products were not considered consumer credit products prior to 10 June 2025, providers were still required to comply with the Design and Distribution Obligations (DDO) in the Corporations Act.
Further Reading
ASIC Regulatory Guide 274: Product design and distribution obligations
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
