New rules on the way to buy-it-now and pay-later plans
The government wants to introduce better checks to buy now, pay later to protect vulnerable Kiwis.
“Buy now, pay later” programs are a growing form of unsecured short-term credit used by consumers to pay for goods and services.
It does not charge interest, although late fees are charged if a payment is missed.
“It’s the right thing to do,” said Trade and Consumer Affairs Minister David Clark.
“As the global cost of living crisis puts pressure on New Zealanders and their families, we are taking action to help them avoid unmanageable debt, particularly as the Christmas season approaches.”
He said the sector has proven popular and grown rapidly – the amount of money spent on these programs in 2021 was $1.7 billion, up from $755 million in 2020.
A spokesperson for Afterpay said it “has always advocated for regulation that delivers good outcomes for consumers, is fit for purpose and proportionate.”
“Getting the right regulatory balance will mean that consumers won’t be pushed back into credit cards and payday loans – products that benefit people who go into debt.”
The government wants affordability checks for purchases over $600 — the same protection in place for borrowers who want to use credit cards and personal loans.
Small loans wouldn’t have to go through the same process, but full credit reports would have to take place, Clark said.
Lenders would also be required to put in place a process in case of difficulties and to adhere to a dispute resolution system.
Consultation on the proposed changes is expected to open later this year, with final regulations adopted in 2023.