Calls intensify to regulate buy now, pay later services

Source: 1News

Consumer advocates continue to call for regulation of buy now, pay later services (BNPL) amidst concerns the vulnerable will spiral into debt.

Christians Against Poverty (CAP) joined Consumer NZ and other organisations such as Fincap, the Salvation Army and Debtfix in recently writing to Minister of Commerce and Consumer Affairs David Clark.

They are calling for BNPL services to be regulated under the Credit Contracts and Consumer Finance Act.

CAP chief executive Sam Garaway told Breakfast it partners with 150 churches around the country, where they work with families who are struggling with debt.

READ MORE: Calls for regulation of popular buy now, pay later services in NZ

He said CAP aims to release them from poverty and unmanageable debt.

BNPL services include Afterpay, Humm, Laybuy, Genoapay and Zip.

Consumer NZ has found one in five Kiwis have debt with a BNPL service and 20% of users paid for BNPL purchases with a credit card, increasing the likelihood of being hit with interest.

Its latest Sentiment Tracker survey found 'unmanageable debt' was now in the top three financial concerns.

"When we're seeing people use them for everyday essentials, and when it's so easy to access, it can quickly get out of hand for people who are using them paycheck to paycheck," Garaway said.

A person using a generic buy now, pay later service.

He said CAP had seen the number of people presenting with BNPL loans triple year-on-year since 2019.

"Our main concern is this is a loan and we should treat it as a loan. And it should be viewed and regulated as a loan and be subject to responsible lending principles that all other loans are subject to," Garaway said.

"We want to see it be a product that cares for consumers before the loan's taken out and cares for consumers during that loan period like other loans would be and subject to those fair lending and responsible lending guidelines."

Global pressure to rein in BNPL schemes

Consumer NZ has also joined advocates in Australia, the US, Sweden, Denmark and the UK to target legal loopholes that enable BNPL businesses to avoid credit regulation.

In November 2021, the Government sought feedback on the relative benefits and costs - including financial hardship- of BNPL services.

READ MORE: Buy now, pay later services stinging customers with late fees

The open letter from the global consumer alliance asked regulators to:

  • Regulate BNPL products in the same way as other forms of credit
  • Require merchants to provide an option that allows a consumer to pay for a product in full at the time of purchase
  • Obligate BNPL providers to assess whether it is suitable and affordable to provide credit to people, without risk of causing financial harm
  • Prohibit BNPL providers from marketing their products in ways that target children or people in financial hardship
  • Enable consumers to have access to redress through fair and independent mechanisms when something goes wrong
  • Ensure regulators monitor and report publicly on the impact of BNPL products for different groups of consumers