Commerce and Consumer Affairs Minister David Clark says a discussion paper on the potential regulation of unregulated buy now, pay later services will be issued later this year.
"I am concerned about any consumer harm arising from buy now, pay later," Clark told interest.co.nz via a spokesman.
"The success of any regulatory solution, including the powers under the CCCFA [Credit Contracts and Consumer Finance Act], depend upon a clear understanding of the root causes of consumer harm and identifying how best to address that harm."
"I have tasked officials with providing advice on this and asked them to work with buy now, pay later providers and consumer advocacy organisations to understand the issues," Clark says.
Buy now, pay later services allow consumers to purchase and obtain goods and services in-store or online immediately, but pay through installments over time. While there are no interest charges, there are penalty fees for late payments. You can see details on all New Zealand's buy now, pay later service providers here.
Buy now, pay later services aren't required to comply with the CCCFA. In 2018 the Ministry of Business, Innovation and Employment decided not to bring buy now pay later services under the CCCFA umbrella even though they have features of consumer credit contracts. At that point MBIE said there was "very limited evidence of harm from them to date." In 2019 Australian buy now, pay later service provider Afterpay threatened to pull out of NZ if it was forced to comply with the CCCFA.
As part of its push to regulate merchant service fees charged by banks to retailers and other businesses, the Government is also looking at the merchant service fees charged by buy now, pay later service providers to retailers. In its submission on the government proposals, Afterpay noted its merchant service fee is 4% of the transaction value, significantly higher than what banks typically charge.
In Britain Economic Secretary to the Treasury John Glen announced in February that buy now, pay later credit agreements will be regulated by the Financial Conduct Authority in order to protect consumers.
"Buy now pay later can be a helpful way to manage your finances but it’s important that consumers are protected as these agreements become more popular. By stepping in and regulating, we’re making sure people are treated fairly and only offered agreements they can afford – the same protections you’d expect with other loans," Glen said.
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