The Government's plan to introduce better checks for buy now pay later schemes to protect vulnerable Kiwis is "delightful" news, financial mentor David Verry says.
Buy now pay later schemes are a rapidly growing form of short-term, unsecured credit used by consumers to pay for goods and services.
It does not charge interest, although late fees are charged if a payment is missed.
The Government wants affordability checks for purchases above $600 – the same protection in place for borrowers' wanting to use credit cards and personal loans.
"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," Commerce and Consumer Affairs Minister David Clark said yesterday.
Speaking to Breakfast this morning, Verry said he's been pushing for these regulations to be implemented for some time.
"We're not against buy now pay later, it's when it's used appropriately but what we find is that people will be tempted to use it in an emergency.
"They'll get the money today but they're not thinking about next week when they have to start repaying that money and that's when they start making choices about well am I going to make my buy now pay later payment or am I going to buy food."
"When you're putting food onto buy now pay later, that's an issue, that's a real issue."
Varry said the proposed regulation will hopefully "bring companies into line" with all other lenders.
"There's going to be a lot of debate whether $600 is the right amount to use, I'm so bias I'd be saying it should be zero but there's got to be somewhere in between that."
He says $600 is a "great" first step.
The Government’s concerned the schemes are sending some people spiralling into debt. (Source: 1News)
People are doing it particularly tough at the moment amid the cost of living crisis, Varry said.
"People are doing it very, very tough and again what we've seen in the last couple of days, the mortgages hitting people, just the cost that are hitting them there."
"All of those things, rates rises for those that have properties, all of those things contributing to far tougher times."
He says his advice to people struggling is to seek financial advice from mentors and get into a budget service.
"You know, do you need to go to Work and Income, can you get hardship provisions put in place if you've got other debts."
Varry says there is help out there for those who need it and there is "absolutely no judgement".
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