But the relatively new industry falls outside the current Credit Act. The discussion paper suggests three regulatory options. The first is a light-touch option with stronger self-regulation and affordability tests.

Option two would partially bring BNPL under the Credit Act,requiring providers to get an Australian credit license and strengthen its industry code.

The third recommendation would fully bring the sector under the Act and make current responsible lending obligations applied to credit card providers also apply to BNPL.

“These products are ‘credit’ in the ordinary sense of the word,” the Treasury report said.

The federal government has said it wants BNPL treated like any other credit product,including payday lending or credit cards.

In a July speech,Jones said calling buy now pay later a credit product should be uncontroversial,and Australia was watching how other jurisdictions like the UK approached regulating the sector. The UK unveiled plans for tougher regulation in June,including affordability checks and bringing the services under its Consumer Credit Act.

“If it walks like a duck and quacks like a duck,it’s a duck,” Jones said at the time. “So let’s have an end to the silly argument about whether BNPL is credit and get on with the next stage of growth for this emerging industry.”

Treasury’s discussion paper noted a corporate watchdog report for the first quarter this year found 19 per cent of BNPL users surveyed had cut back or gone without essentials to make payments on time. The Australian Financial Complaints Authority also said it received relatively few complaints about BNPL products – 767 in 2020-21.

Some providers told Treasury they had implemented risk management practices including credit checks,or restricting further use of the services if consumers miss payments.

Another issue noted by the report was that generally speaking BNPL debts are not reported to credit reporting bodies,which are used to work out people’s credit scores. The report said that could lead to “problematic gaps in a person’s credit file”.

“Consumers may find it harder to demonstrate they have good repayment history if BNPL providers cannot participate in comprehensive credit reporting,impacting their ability to access credit in the future,” it said.

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