The new financial services minister, Stephen Jones, says the Albanese government will push ahead with plans to bring buy now, pay later (BNPL) operators such as Zip and Afterpay under credit laws, in a further blow to the embattled sector.
In an interview with Guardian Australia, Jones also indicated the new government could demand the corporate watchdog restore the “why not litigate” approach it dumped last year, and said it would move to regulate cryptocurrency exchanges in the same way as other financial markets.
He said the government would fill an empty commissioner seat at the Australian Securities and Investments Commission left by the departure last Thursday of Cathie Armour, who was responsible for the oversight of markets including the stock exchange.
And it will move to overhaul benchmarks used by the Australian Prudential Regulation Authority to measure the performance of superannuation funds after allegations they gave a leg up to underperforming funds run by the for-profit sector.
BNPL operators are currently exempt from laws designed to protect borrowers who use products such as credit cards or personal loans, because the product they offer is technically not credit.
The sector has opposed regulation, saying it has put in place an industry code of conduct.
While the sector was at one time a sharemarket darling, in more recent times stock prices have crashed because profits have largely proved elusive amid fears that bigger operators, including banks and tech companies, are moving in on the market.
The share price of leading Australian BNPL group Zip fell by more than 14% on Tuesday on news that Apple is to offer its own BNPL product.
“Products like Zip and Afterpay, I think they’re a good innovation in the credit market,” Jones said.
“Can we stop having an argument about whether [they’re] credit or not? It really is a dead-end street.
“Let’s start working on regulating [them] within the credit space. We welcome the fact that they’ve introduced a code, [and will] move to legislate it and fill any gaps.”
He said he would work with the treasurer, Jim Chalmers, on a new statement of expectations setting out what the government wants from Asic.
Asic adopted a “why not litigate” approach in 2019, on the recommendation of banking royal commissioner Kenneth Hayne, whose inquiry delved into the regulator’s failures to rein in a greed-driven culture within the financial services industry.
In September, as Asic was reeling from a series of attacks on it by government backbenchers, chair Joe Longo dumped the phrase from the regulator’s corporate plan.
At the time, Longo rejected criticism, saying he did not see any “soft pedalling or whatever words people like to use on the question of enforcement”.
However, Jones told Guardian Australia he wanted to see the cultural deficiencies within Asic that Hayne identified addressed, and the reforms proposed by the commissioner adhered to.
Asked if this specifically meant bringing back “why not litigate”, he said: “We expect that all the deficiencies, cultural and otherwise identified by the Hayne royal commission and the remedies proposed will be adopted and maintained by the regulators.”
Armour, a former Macquarie Group executive, left Asic without fanfare last Thursday after nine years. The former treasurer, Josh Frydenberg, neither extended her term nor nominated a replacement to take care of the important markets portfolio, which includes oversight of the Australian stock exchange.
Jones said a replacement would be appointed by Chalmers after consultation with Treasury portfolio ministers and the prime minister.
“It’s obviously an incredibly important function, and we want to ensure that [Asic] has more capacity,” he said.
He said he would continue a consultation process started by Frydenberg about regulating cryptocurrencies.
He said his aim was to make cryptocurrency trading “transparent where it’s currently opaque”.
“That all leads to a couple of things,” Jones said.
“One is proper regulation through market powers of exchanges. It also raises questions about whether and how cryptocurrency as a product is regulated in our financial services system – is it regulated as a financial product?
“Or do we have a standalone way of recognising and regulating? These are questions we need to work through.”
On super, he said reviewing the performance benchmarks would be “a matter of priority”.
The government will also act on “a couple of court decisions with some perverse impacts that we need to put some remedial legislation in place so that people aren’t disadvantaged,” Jones said.
“You will notice that the prime minister, when he was in Indonesia yesterday, said that he wanted to get some Australian super funds considering Indonesia as a destination for their offshore investments, a bit of work needs to be done in that space as well.”
Jones said the previous government left him with plenty of problems to solve and his first priority was to figure out “where the burning decks are”.
“You can be guaranteed that if a tough decision or a tricky problem was confronting the Morrison government it’s remained – it’ll be in our in-tray,” he said.
