Christmas consumers were warned buy now pay later offers had certain features that made it easy to rack up debt. Photo: 123RF
Consumers are being warned to be mindful of buy now, pay later offers, with consumer protection regulations covering the sector still pending.
The government is proposing to amend the definition of credit contracts to include buy now pay later (BNPL) products. The rule change would require providers to undertake affordability checks on loans of $600 or more.
Chartered Accountants Australia and New Zealand tax leader John Cuthbertson said until the changes were in place its advice for Christmas consumers was to "watch out for potential debt traps".
While BNPL had allowed people to get products earlier than they otherwise would have, it also created a financial black hole that some consumers would struggle to get out of.
"As the government's recent consultation process identified, BNPL has certain features that make it easy to rack up debt," Cuthbertson said.
However consumers would not run into trouble unless they failed to keep up with their payments.
Ministry of Business, Innovation and Employment (MBIE) figures showed the money spent with BNPL in New Zealand grew to $1.7 billion in 2021, well above the $755 million in 2002.