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Buy Now Pay Later – A critique of the 2024 reforms

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Consumer NZ and FinCap with research by Victoria University of Wellington Te Herenga Waka

Extract:

Buy Now Pay Later (BNPL) is a type of financial arrangement that allows consumers to access goods or services on the spot but pay for them at a future time in a series of interest-free instalments. BNPL arrangements do not involve interest charges, credit fees, security interests or set-up fees. However, if payments are missed or delayed, the BNPL service provider may charge the consumer late payment fees. Because BNPL arrangements allow consumers to purchase goods and services while deferring paying for them, in economic substance, such arrangements are providing a form of credit.

This is the second report in a two-stage research project about BNPL. The project has the overall purpose of investigating whether the changes to New Zealand’s consumer credit laws applicable to BNPL products in New Zealand, which took effect on 2 September 2024 (referred to this report as the September 2024 Regulation), go far enough to protect consumers in New Zealand.
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This stage 2 report makes three recommendations.

  • Impose on BNPL providers the obligation to undertake affordability assessments.

  • Undo the November 2024 exemption relating to unreasonable fees.

  • Require quasi-BNPL arrangements to be subject to the CCCFA by relying on the power in s 137A of the CCCFA.

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