Better controls to prevent vulnerable consumers from ending up in Buy Now, Pay Later (BNPL) debt traps are on the way, the Minister for Business and Consumer Affairs, Dr David Clark, announced today.
“It’s the right thing to do. 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, especially as the Christmas season approaches,” said David Clark.
“While for many BNPL can be a useful way of spreading the cost of large household purchases, we try to prevent vulnerable people from going into debt if lenders allow them to take on more than they can afford. .
“The BNPL sector is clearly a grassroots innovation. The amount spent with BNPL in New Zealand rose to $1.7 billion in 2021 from $755 million in 2020. That’s why we need to make sure these products and the companies that offer them serve consumers well. and that they can be held responsible. »
The government has agreed affordability checks should apply to BNPL loans above a certain threshold (proposed at $600), meaning borrowers will enjoy the same kind of protection as borrowers using other credit agreements – such as credit cards and personal loans. Options on how affordability checks should be done will be consulted.
Small loans, below the threshold limit, will not have to go through the same process, but full credit reports will have to take place.
All suppliers will be required to have hardship processes in place and adhere to a dispute resolution system. Directors and senior officers will also need to be certified fit and proper by the Commerce Commission.
“We will strike the right balance between protecting consumers and enabling continued access to low-cost credit by applying the Consumer Credit Agreements and Finance Act 2003 (CCCFA) in a proportionate way,” said David Clark.
The Department for Business, Innovation and Employment (MBIE) aims to begin consultation on the details, including a proposed $600 threshold and what will apply above the threshold, later this year . Final regulations are expected to be established in 2023.