ASIC has accepted a court enforceable undertaking from buy now, pay later provider Elevare Pay Easy Pty Ltd, trading as Elepay.

Elepay offers funding to property owners for expenses relating to the preparation of their property for sale, including home improvements and renovation, design and marketing. Elepay’s buy now, pay later products do not include charges for providing credit, but do include a merchant fee payable to Elepay by a third-party supplier.

Elepay also offers short term loans which include fees, and in some cases, interest charged to consumers.

Elepay’s products are financial products under the Design and Distribution Obligations (DDO) of the Corporations Act which requires Elepay to make a Target Market Determination (TMD) before offering them to consumers.

TMDs ensure that products are only sold to consumers in the target market for that product and that the product is appropriate to their needs and objectives.

Elepay admits that from 5 October 2021 to 15 March 2023 it did not have TMDs for seven credit products it distributed to consumers. During this period, Elepay lent $13.748 million to 1,658 retail clients.

ASIC is concerned that Elepay’s failure to make TMDs exposed consumers to the risk of obtaining a financial product that was inappropriate to their needs and objectives.

ASIC is also concerned that Elepay did not have the appropriate compliance systems and controls in place to comply with the DDO.

Elepay made TMDs for its products on 15 March 2023.

To address ASIC’s concerns, Elepay has offered, and ASIC has agreed to accept, an undertaking that it will engage an independent expert to report on:

• whether Elepay’s clients who were issued with one of its products after 5 October 2021 fell within the target market of clients identified in the TMDs,
• the fees and charges that have been paid to Elepay by clients who fall outside of the target market specified in the TMDs,
• whether Elepay’s TMDs comply with the requirements of the DDO and if not, what steps Elepay needs to take to rectify this.

Elepay must notify clients who fall outside of its TMD of the expert’s finding, immediately cease charging those clients any fees and charges, and refund any fees or charges already paid.

From 5 October 2021 to 15 March 2023, Elepay did not hold an Australian credit licence. On 18 October 2023, following the commencement of ASIC’s investigation, Elepay applied to ASIC to obtain an Australian credit licence. On 23 January 2024, ASIC granted Elepay a licence.

View ASIC's Court Enforceable undertakings register.

Background

Although buy now, pay later products are not considered credit products, they must comply with the DDO.

The DDO commenced on 5 October 2021. They require issuers and distributors to take a consumer-centric approach by placing consumer outcomes front and centre at the product design, product distribution, and monitoring and review stages of the product life cycle.

The Corporations Act extends the definition of ‘financial product’ for the purpose of the DDO to include a ‘financial product’ within the meaning of the ASIC Act, which includes a ‘credit facility’.

ASIC may accept a court enforceable undertaking to improve and enforce compliance with the law. Further guidance on how ASIC uses court enforceable undertakings can be found in Regulatory Guide 100 Court enforceable undertakings (RG 100).

Editor's note: 

On 9 September 2024, the independent expert appointed by Elepay under the terms of the court enforceable undertaking provided ASIC with its final report.   

In the report, the independent expert concluded that:

• none of Elepay’s clients who entered into the 3,421 contracts with the company during the period 5 October 2021 to 1 February 2024 fell outside of the target market in Elepay’s TMDs;
• all of Elepay’s TMDs comply with the requirements of the DDO.

ASIC is satisfied that Elepay has complied with the terms of the undertaking.