Better protections for Kiwis using Buy Now, Pay Later

Commerce and Consumer Affairs

Better checks to stop vulnerable consumers landing themselves in Buy Now, Pay Later (BNPL) debt traps are on the way, Commerce and Consumer Affairs Minister Dr David Clark announced today.

“This is 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 looms,” David Clark said.

“While for many, BNPL can be a useful way to spread the cost of large household purchases, we are trying to stop vulnerable people getting into a spiral of debt if lenders allow them to take on more than they can afford.

“The BNPL sector is clearly a popular innovation. The amount of money spent with BNPL in New Zealand grew to $1.7 billion in 2021, up from $755 million in 2020. This is why we need to make sure these products and the companies that offer them are serving consumers properly, and that they can be held accountable.”

The Government has agreed affordability checks should apply to BNPL loans above a certain threshold (proposed at $600), meaning borrowers will receive the same kind of protections to borrowers using other credit contracts – like credit cards and personal loans. Options for how the affordability checks should be carried out will be consulted on.

Smaller loans, under the threshold limit, will not have to go through the same process, but comprehensive credit reporting will need to occur.

All providers will be required to have hardship processes in place and belong to a dispute resolution scheme. Directors and senior managers 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 Credit Contracts and Consumer Finance Act 2003 (CCCFA) in a proportionate way,” David Clark said.

The Ministry of Business, Innovation and Employment (MBIE) aims to commence consultation on the detail, including a proposed threshold of $600 and what will apply above the threshold, later this year. It is intended that final regulations will be made in 2023.