Gov increases protections for kiwis using buy-now-pay-later

The government has increased protections for consumers using buy-now-pay-later (BNPL) credit contracts.

Under the new legislation, BNPL lenders will be required to complete comprehensive credit reporting when customers sign up or increase their credit limit.

The details of these regulations will be announced soon, with BNPL lenders to be given a grace period to implement systems and processes to meet the new requirements.

This comes after the government decided in October 2022 to bring BNPL within the Credit Contracts and Consumer Finance Act (CCCFA) and then conducted public consultation.

Commerce and Consumer Affairs Minister Dr Duncan Webb said the new rules would strike a balance between ensuring fit-for- purpose rules for the BNPL sector and reducing risk for vulnerable consumers.

“BNPL can be a convenient and low-cost form of credit for many people as they do not charge interest, however current rules have no protections for consumers who will struggle to make repayments,” he said.

“We’ve recognised that some adjustments are necessary to make sure the regulations are workable and proportionate and consumers can continue to enjoy the benefit of these interest-free loans. Cabinet has accepted the need to exempt BNPL loans from affordability and suitability assessments – that would be too onerous for these short-term, low-value, interest-free loans.”

Govt plans to make further CCCFA changes

Meanwhile, the government has announced a wider review of the CCCFA and some additional exemptions for certain types of lending.

This is designed to keep the CCCFA up to date and ensure it strikes the right balance between having a healthy market for credit and protecting consumers.

“We will be extending an exemption for voluntary targeted rate scheme loans (these low-cost loans are usually for sustainable home improvements like insulation) administered by local and regional councils. This will carve them out from the CCCFA and avoid unnecessary compliance costs. I expect regulations to give effect to this exemption to be made by the end of the year,” Dr Webb said. 

“And we will also be developing a permanent exemption from certain CCCFA obligations for people affected by emergency events. Based on an assessment of the temporary exemptions in place after the Auckland floods and Cyclone Gabrielle, we see a case for something more permanent, especially as these events are becoming more frequent.”