Source: Radio New Zealand
Buy Now Pay Later schemes including Afterpay are popular with consumers, with one million Kiwis using them. Screenshot
Financial watchdogs want the rules about Buy Now Pay Later schemes strengthened, saying the last tweak didn’t work.
It’s been described as both a lifeline, and a trap.
Buy Now Pay Later (BNPL) has been in New Zealand for about eight years. It’s still a relatively new product, but one million Kiwis use one of the four companies providing it.
However a new report from Consumer NZ and FinCap, with research done by Victoria University, has raised concerns about the damage BNPLs are doing to some borrowers.
The report says a regulatory tweak in the rules in 2024 did nothing to help prevent harm, and financial mentors report people are trying to break into their KiwiSaver schemes to pay their debt.
The report recommends tightening the rules further to get better protection for consumers.
Today on The Detail, we talk to Michael Saadat, the International Head of Policy at Block, Afterpay’s Australian parent company, who says it’s not necessary for the New Zealand government to bring in any additional regulation.
“We think the evidence and the data should really drive any consideration of whether new regulation is required, and the data clearly shows that additional regulation, when it exists for other credit products, hasn’t delivered better consumer outcomes.”
He says such extra regulation brings additional costs which ultimately have to be passed on to consumers, “but also, we don’t want a situation where for example it’s harder for Kiwis to get access to a product like Afterpay, and that means that they have to go and find alternatives which are much more expensive, much less safe … and we just don’t think that’s a great outcome.
“We think the current regulatory settings have struck the right balance.”
Saadat says the New Zealand regulations are a clear example of how you can balance consumer protections with the need to promote innovation and foster safer consumer products.
He says our credit data collection agency, Centrix, which Afterpay must provide reports to, says New Zealanders who use BNPL products are in a healthy position.
“Traditional credit products like personal loans, credit cards and mortgages actually remain the primary drivers of hardship for New Zealanders.”
Centrix data says that 97 percent of the New Zealand BNPL transactions over Black Friday and Cyber Monday were paid off before or on the dates payments were due.
“Which again tells you that consumers are using the product in the way it was meant to be used. They’re using it wisely, it’s helping them budget for their purchases, and they’re not getting into trouble.
“It really is becoming a really mainstream product that consumers are using to help manage their spending,” Saadat says.
Asked why the bad press and the call for more regulation, he says that “financial mentors are experiencing consumers at the coal face who are in financial difficulty”.
“They would see consumers who’ve gotten themselves into trouble with all sorts of different products that they might have taken up. That is something that informs their approach to these issues, but fundamentally when we’re thinking about what policy settings should be in place, we do need to look across all consumers and understand what the overall consumer experience is.”
The Consumer NZ/FinCap report has three recommendations for Buy Now Pay Later lending.
It wants affordability assessment requirements introduced; a rule that lenders can’t charge unreasonable late fees; and it wants other lending like phone handset deals and in-store payment schemes that have late fees included in credit law protections.
Report author Victoria Stace, a senior lecturer at Victoria University of Wellington whose research is in areas of consumer credit and financial protection, says because BNPL didn’t have an interest component, it was outside of credit rules until 2024, when it was brought within the CCCFA rules – although in a limited way.
“If it’s used well, and you pay off your instalments without defaulting, it can work out better [than credit cards] because it’s an interest-free arrangement,” she says.
However, financial mentors are saying that of the clients they’re seeing with money troubles, more people have BNPL debt as a proportion of their overall debt than before the 2024 regulatory fixes.
Stace also suspects that BNPL credit is being used to pay off other debt.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
