The government may add regulation to Buy Now Pay Later loan applicants. Photo: 123rf.com
The government wants to tighten the screws on buy now pay later loans to stop consumers falling into unmanageable debt.
It is proposing affordability checks for buy now pay later (BNPL) loans above $600, giving borrowers similar protections found in credit contracts.
Commerce and Consumer Affairs Minister David Clark said he also wants smaller loans under this threshold limit subject to comprehensive credit reporting.
"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."
Clark said the amount of money spent with BNPL loans jumped from $755 million in 2020 to $1.7 billion in 2021.
"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."
It will also require providers to have hardship processes in place and belong to a dispute resolution scheme while directors and senior managers will need to be certified fit and proper by the Commerce Commission.
"We will strike the right balance between protecting consumers and enabling continued access to low-cost credit by applying the Credit Contracts and Consumer Finance Act 2003 in a proportionate way," Clark said.
The Ministry of Business, Innovation and Employment will begin consulting on the proposal's detail, including the proposed threshold of $600, later this year with the intention to introduce regulations in 2023.