New Zealand has joined a growing list of nations creating regulations to protect consumers taking part in the country’s $1.7 billion buy now, pay later (BNPL) sector.
The country’s Minister of Commerce and Consumer Affairs David Clark announced Wednesday (Nov. 2) that the government thinks affordability checks should apply to BNPL loans greater than $600 — a proposed amount — giving borrowers the same protection as people applying for credit cards and personal loans.
“This is the right thing to do,” Clark said in a news release. “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 noted that BNPL is popular in New Zealand, with people there spending $1.7 billion on BNPL purchases last year, more than double the amount from 2020.
While the regulations are still being hammered out and won’t go into effect until next year, the government says its protections will make sure consumers are better equipped to make decisions before using BNPL. It will also require BNPL providers to create hardship processes for borrowers and take part in a dispute resolution plan.
Meanwhile, New Zealand’s neighbor Australia — where a number of high-profile BNPL companies are based — is apparently finishing up its review of how to regulate these firms, Australia’s NCA newswire reported Wednesday.
For example, in June, Australia Financial Service Minister Stephen Jones announced the government would bring BNPL under credit laws. BNPL companies are currently exempt from laws designed to protect borrowers who use apply for credit cards or seek personal loans.
“Products like Zip and Afterpay, I think they’re a good innovation in the credit market,” Jones said. “Can we stop having an argument about whether [they’re] credit or not? It really is a dead-end street. Let’s start working on regulating [them] within the credit space. We welcome the fact that they’ve introduced a code, [and will] move to legislate it and fill any gaps.”