FinTech: New Zealand Mulls Protection Against BNPL Debt Traps

November 2, 2022 | FinTech, News
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Better checks are to be put in place to safeguard vulnerable BNPL consumers.

New Zealand Commerce and Consumer Affairs Minister Dr David Clark announced that the Government intends to put in checks and balances in the Buy Now Pay Later (BNPL) financial innovation that allowed consumers to pay for their purchases in instalments. The primary concern centers around consumers landing themselves in BNPL debt traps. (Beehive.govt.nz)

“The BNPL sector is clearly a popular innovation. The amount of money spent with BNPL in New Zealand grew to $1.7 billion in 2021, up from $755 million in 2020. 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,” said David Clark.

“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.”

“This is the right thing to do. 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,” he added.

Key proposals for consultation

· Affordability checks should apply to BNPL loans above a certain threshold (proposed at $600)

· Same protections to apply to borrowers as those for credit cards and personal loans

· Mechanism for affordability checks to be worked out

· Smaller ticker BNPL amounts will not require the above process, but will be reported in credit history

· All providers will be required to have hardship processes in place and belong to a dispute resolution scheme

After consultations, final regulations will be notified in 2023.

Related Story: UK Households Resort To BNPL To Cover Surging Energy Bills

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