A stolen identity and a mystery debt have left an Auckland man concerned at how easy it is to use Buy Now Pay Later schemes - and relieved that Fair Go was able to help sort out his trouble.
"If I was to lend out money to anyone, I'd want to make sure that they are who they are and they are going to pay it back," says Beau Dobson.
Dobson discovered in September 2021 that someone had used his driver licence details two years earlier to open an account with Laybuy, an NZ-based lender that offers Buy Now Pay Later or BNPL.
At the time, they bought a mobile phone, leaving more than $700 on Laybuy unpaid. Around the same time someone had opened a store credit card in Dobson's name with the same stolen details and run up nearly $5000 in debt.
When that eventually went to Baycorp for collection, Beau got a call at work and the first inkling that any of this had happened to him.
"It gets your heart racing. You think what's going on here first and foremost and then from there you're in recovery mode and trying to figure out what to do to sort it out."
The larger debt with the store card was quickly investigated and wiped, but Laybuy has stood its ground, insisting Dobson pay for the phone he'd known nothing about.
Dobson has spent six months trying to clear his name and credit record and was only successful after Fair Go escalated his case to the top at Laybuy, tracking down its Kiwi co-founder and chief executive Gary Rohloff on a business trip in London.
"Look there's always room for improvement," Rohloff told Fair Go, who insists his team made the correct call at the time with the information he says they had available.
"We are a business that's evolving rapidly and look obviously in this situation our process has let us and the consumer down and we need to put it right."
Dobson still wasn't sure after a Laybuy employee then emailed him saying it still had no evidence of any fraud but as a goodwill gesture would wipe any debt.
However, Roholoff has assured Fair Go in a video interview from London that his company will expunge Beau's credit records to clear the default it has listed on them.
"When I get back to New Zealand, I'd just love to catch up with him for a coffee and apologise," Rohloff told Fair Go.
Rohloff insists no amount of regulation would prevent criminals from stealing people's identities and misusing them, but Dobson's case has raised questions about how easy it is to access BNPL and whether it's time for stricter regulation.
Whoever opened that account only had to provide a driver licence number that matched Dobson's name on the Government's central record; Laybuy didn't cross check the address held there to see if that matched Dobson's address on his credit file. That might have flagged up the application for more checks or suggested someone was trying to steal his identity.
The schemes have only been around about five years and avoid the Consumer Credit Contracts and Finance Act because they don't charge an interest rate, even though they are lending money.
Rohloff told Fair Go that Laybuy processes more than $1 billion in transactions on an annualised basis in New Zealand, Australia and the UK.- all countries where regulators are looking at stricter regulation of the emerging industry.
"We're providing a very frictionless service," says Rohloff.
"I'm supportive of appropriate regulation; it just needs to maintain the utility of the product."
He says the average BNPL transaction is around $150 and the average credit limit is $240. He's also refused to allow Laybuy customers to borrow for groceries or alcohol.
Fair Go has had reports of people using other BNPL schemes to buy meat, a sure sign that there is scant checking for affordability when signing up customers.
"We think it's like the wild west out there, being unregulated," says FinCap chief executive Ruth Smithers.
She points to the late fees the schemes charge that make up around a quarter of their revenue and the lack of any legal requirement to perform an affordability assessment on a new customer.
"They are already in a position of being unable to pay back a loan and yet they can access those buy now pay later loans easily. It just ends up becoming debt spiral to afford to get by on the day to day," says Smithers.
She met with the Commerce Minister David Clark this month to push for BNPL lenders including Laybuy, Afterpay, Zip, Humm and others to be included in the safe lending laws that cover more established forms of finance like credit cards, car loans and bank loans. FinCap also wants that to cover telcos like Spark, Vodafone and 2degrees that sell people expensive mobile phones on a one-to-three year plan bundled into their phone bill, another form of lending that is largely unregulated.
"It is an anomaly that they're not covered by the safe lending regulations. Any of us could be in the situation where we're struggling to pay bills. What we really want is the safe lending practices to apply to all lenders, including Buy Now Pay Later providers."
A spokesperson for Minister Clark told Fair Go any decisions on BNPL are likely be come mid-year but it's "being actively discussed" right now.