A non-profit community lender is concerned at the impact of buy now pay later (BNPL) services.
Ngā Tāngata Microfinance (NTM) say it’s getting so hard for the low-income people that they’re getting loans to pay their BNPL accounts, NTM chief executive Natalie Vincent said.
“We have repaid a number of clients BNPL debts to clear them off their schedule of debts,” Vincent said.
While she’s happy that interest-free services are servicing low-income people, she wonders if they’re creating more trouble than benefit.
“Without consumer protections in place there is very real potential for harm,” Vincent said.
She says their ‘sophisticated marketing’ can cause consumers to spend more than they can afford to repay.
More than half of Ngā Tāngata Microfinance clients under the age of 30 had BNPL accounts. The percentage reduces among their older clients, but the numbers continue to concern Vincent.
As such, she wants the Government to step in and regulate the BNPL industry.
While BNPL services are typically interest-free, late payers are being stung with nasty late fees.
“There are also fees for defaults that easily snowball,” Vincent said.
Vincent says one NTM client had a total of $50 of late fees piled on, when a payment for $79 didn’t clear.
Another NTM client had 36 BNPL payments going out per fortnight. Another client had been referred to debt collection for a debt of $400.
Vincent wanted to send a clear messge to the community. “If you owe someone money, then it’s a debt.”
Her warning to the public is to treat BNPL like any other debt.
Afterpay explains how they work with late payers
NTM did not name the BNPL companies that they had paid out, but Te Karere approached Afterpay for comment on how they deal with late payers. They sent a statement through their media agent for NZ.
“Customers are reminded about the possibility of late fees every time they place an order. We don’t hide things in the fine print,” they said in a statement through their NZ media agent.
Further reminders are sent closer to the payment date, and a reminder is sent if a payment is missed.
They charge a late fee of $10 per missed payment and a further late fee of $7 if the payment isn’t made within seven days.
But the statement stresses that their fees are capped at which is lower between $68 or 25 per cent of the purchase price.
In addition, late payers cannot buy any more items on Afterpay until their arrears are cleared.
The Ministry of Business, Innovation & Employment (MBIE) issued a discussion paper to kick off a round of consultation with the public about BNPL. They want to hear from the public, including BNPL customers and businesses, with Afterpay welcoming the move.
“Afterpay welcomes the publication of the New Zealand Government’s Discussion Paper on the Buy Now Pay Later (BNPL) industry and will be making a submission,” they said in a statement.
“We are especially pleased to see the Discussion Paper recognise the competition and consumer benefits of our product, which has turned the traditional model of credit on its head.”
Vincent says NTM is preparing a submission as well.