Jeremy Cooper, financial mentor in Auckland, is sick of seeing struggling people able to get multiple BNPL loans.
Saadat does not accept that smaller BNPL loans are the root of such hardship, claiming it is larger loans like car, and personal loans, that are the real problem.īut mentors say desperate people can lump BNPL loans on top of their already crushing debts, tipping them into a debt spiral. We’re in the final stages of implementing that from a technology perspective,” Saadat says. “We’re very close to going live with that. While most people cope with their BNPL loans, financial mentors say BNPL loans are being given to people who can’t afford to pay them back, plunging them into financial hardship. It would prevent people already failing to make payments from opening new BNPL accounts, but was not intended to prevent people with multiple accounts from borrowing on one, despite being behind on another.Ĭritics say the indicator would fall short of more time-consuming and costly credit checks, which show whether people are behind on any loan or utility payments, giving a more complete picture of whether they could cope with more debt.īut despite the threat of regulation by the Government, mirroring moves in the UK and Australia, Michael Sadaat, vice president of global regulatory affairs at Afterpay, says the indebtedness indicator is still some months away. This indicator would flash red alerting BNPL lenders when someone applying for an account had an overdue account with another BNPL lender. * The buy now, pay later dilemma: How hard should the latest form of consumer debt be regulated?īut it has also so-far failed to put in place the cornerstone of its self-regulatory hopes: the “indebtedness indicator”, which it said last year could be in place as soon as the first three months of this year. * Consumer: Shoppers paying $10m in buy-now-pay-later late fees * Government ponders regulating 'buy now, pay later' lenders
In the face of planned regulation around the world, the sector is scrambling to take matters into its own hands. The number of borrowers falling behind on payments and being stung by late fees is growing. Humm Group is retreating from the market, while Zip and Laybuy are cutting costs, and jobs, in a bid for profitability. The rapid growth of small, interest-free consumer buy now, pay later (BNPL) loans has gathered a million users in New Zealand, but the massive popularity of BNPL loans has not translated into massive profits. They were touted as the next big thing for the retail landscape, freeing shoppers from the burden of interest-bearing credit cards.īut now many buy now, pay later lenders are struggling financially, even before the Government announces its plans to regulate them.
Jake Lilley, senior policy adviser at Fincap, explains why buy now, pay later needs regulating.
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