New rules on the way buy now pay later regulations

The government wants to introduce better checks for buy-now-pay-later schemes to protect vulnerable kiwis.

Buy now, pay later programs are a rapidly growing form of short-term, unsecured credit used by consumers to pay for goods and services.

No interest will be charged, although late fees will apply if a payment is missed.

“That’s the right thing to do,” said Trade and Consumers Secretary David Clark.

“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 holiday season approaches.”

He said the sector has proven popular and has grown rapidly — the amount of money spent on these programs in 2021 was $1.7 billion, compared to $755 million in 2020.

A spokesperson for Afterpay says it has “always championed regulation that promotes strong consumer outcomes, is fit for purpose and proportionate.”

“Achieving the right regulatory balance means consumers aren’t pushed back to credit cards and payday loans — products that benefit from people getting into debt.”

The government wants affordability checks on purchases over $600 — the same protections for borrowers who want to use credit cards and personal loans.

Smaller loans don’t have to go through the same process, but comprehensive loan reporting does have to be done, Clark said.

The lenders would also have to set up a hardship procedure and belong to a dispute settlement system.

Consultation on the proposed changes is expected to begin later this year, with final arrangements in 2023.