Warning over pay-later Whanganui budget adviser says clients not in a position to take on easy debt

• Published date: 10 February 2022
• Author: Jacob McSweeny
• Publication title: Whanganui Chronicle

The Ministry of Business, Innovation and Employment (MBIE) is looking closely at how buy-now, pay-later (BNPL) schemes may cause financial hardship in New Zealand and recently heard from consumers, businesses and other parties about the products

Whanganui Budget Advisory Service manager Sandy Fage said she knew of a family in Whanganui who were buying their fortnightly meat via a BNPL service.

“They go in and get maybe ... $80 worth of meat, which is a fair bit of meat,” she said.

But the numbers didn’t work out because the couple were only paying it off with $20 a fortnight.

“That $80 a fortnight is not going to last them eight weeks. Then at about week five they’ll go back to [the butcher] and get some more meat. So they now have another $20, plus the $20 they’re still finishing up from the first [plan].

“So you can see how it snowballs, and they’re just buying their meat.”

Fage said she had another client who was a beneficiary and was struggling to pay off 10 different buy-now, pay-later plans.

“I’ve got nothing against the companies that use [BNPL], I have no problem with that — they are just finding a way to make a sale.

“But I would like to see some sort of regulation around how that happens.”

Fage is backing a FinCap submission to MBIE asking for BNPL schemes to come under the rules of the Government’s recently amended Credit Contracts and Consumer Finance Act (CCCFA).

The CCCFA demands lenders closely look at an applicant’s money situation and justify whether they can fit the repayments into their budget.

The act has come under scrutiny because of the way banks have interpreted it and tightened lending to people trying to get a mortgage.

Fage said the hardest part of the BNPL issue for financial mentors was getting clients to control spending.

“I’m always going on about the fact that ‘your money is your personal responsibility, what happens to it and how it works for you is your responsibility’.

“Some people don’t have the skills to be able to tackle that — they’re just swept along with whatever’s happening.”

The BNPL services that operate in New Zealand are Afterpay, Humm, Zip, Laybuy, Latitude (Genoapay), Openpay and Klarna.

MBIE describes BNPL as a product that allows consumers to receive goods and services immediately but pay for them in instalments over a specified period (one to three months) interest-free.

The ministry...