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Concerned about any consumer harm from buy now, pay later services, Commerce and Consumer Affairs Minister David Clark says government to consult on possible regulation

Concerned about any consumer harm from buy now, pay later services, Commerce and Consumer Affairs Minister David Clark says government to consult on possible regulation

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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6 Comments

Haha funny to be concerned about this, but no problem on the 'buy now, don't pay at all' interest only loans on million dollar houses.

Which is doing more damage to society?

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Not only the Interest Only loans, but equity release for a deposit.

Take someone with 10 properties worth $1 million each, a modest 10% increase in prices = an extra $1 million in equity. Can buy 2 more investment properties worth $1.1 million @ 60% LVR. Hell, anyone with 2 properties worth $1mill under current settings (20% price inflation) can buy another. A self feeding loop, extra demand = increased equity = extra demand. Only thing underpinning it is the poor serfs tenants being asked to service the mortgage costs.

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Yeah agree - think all houses should (have) require/d cash deposits. Allowing equity in one house to buy more houses is bloody mad in my view. Imagine all of the property investors who wouldn't have been in a position to compete with FHB if they had to front up with $200,000 cash to buy the house like the FHB did (assuming that Mum and Dad didn't provide the deposit of course..)

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"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."

What leverage does Afterpay have that they could make that threat?

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Why? Shouldn't we spend more to boost our economy? Isn't that the whole point of historical low interest rate to encourage more people spend more and get the cheap loans? I think we should allow houses to be deposit and encourage people to borrow money and spend more. I'm pretty sure the GDP will look awesome ;)

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"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,"
Yet they choose to ignore the largest loan in the country:
"A Taupō househunter says buyers are deliberately being put under unfair pressure as real estate agents increasingly use auctions to sell properties.
Jennifer Stillman has complained about marketing material sent to her by one real estate agency which openly highlighted the psychological pressures at play during a house auction, which could cause bidders to exceed the limits of what they were prepared to spend."
https://www.stuff.co.nz/business/300327921/househunter-upset-at-manipul…

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