NEW ZEALAND plans to require providers of buy-now, pay-later (BNPL) products to conduct an affordability check on customers before agreeing to a loan.
The government is proposing the checks should apply for loans above NZ$600 (S$496), meaning borrowers will receive the same kind of protections as those who seek credit cards and personal loans, Commerce and Consumer Affairs Minister David Clark said on Wednesday (Nov 2) in Wellington. Smaller loans will not have to go through the same process, but credit reporting will need to occur, he 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," Clark said.
BNPL products typically allow consumers to pay for purchases in four instalments with the promise of little to no fees, no interest and quick credit approvals, but with late fees charged if payments are missed.
The amount of money spent with BNPL in New Zealand grew to NZ$1.7 billion in 2021 from NZ$755 million in 2020, according to government figures.
"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," Clark said.
The government will develop regulations that will treat BNPL as a consumer credit contract under the Credit Contracts and Consumer Finance Act. Officials will consult on the loan threshold at which affordability checks will apply and will also seek feedback on how the checks should be carried out, Clark said.
All providers will be required to have hardship processes in place and belong to a dispute resolution scheme, he said. Directors and senior managers will also need to be certified fit and proper by the Commerce Commission. BLOOMBERG