Good Shepherd NZ welcomes the announcement from Commerce and Consumer Affairs Minister Duncan Webb confirming regulation requirements in the Buy Now Pay Later (BNPL) Sector but does not believe it goes far enough to mitigate harm for New Zealanders in the most financial hardship.

The regulations include credit reporting at sign-up and at the time of requests for credit limit increases, but a credit reporting alone does not signal suitability or affordability. Responsible lending processes, as required by other lenders, need to include affordability checks - without confirmation of a client’s income and expenses it is not possible to assess a person’s full financial position to extend a fair line of credit.

We know people will prioritise debt repayments over other essential costs to ensure access to the credit facility is not closed off. They will forego things like food, heating, and medical bills, which has dire consequences.

We are seeing more and more people with BNPL layered on top of other debt that has become unmanageable, as people try to navigate the high cost of living on relatively low incomes.

Natalie Vincent, Head of Microfinance says "Increasingly we are seeing BNPL used for day-to-day expenses, as living costs for those on low or limited incomes become more unmanageable. Allowing these lines of credit to remain outside affordability assessments because they are for small amounts, directly affects those who are most unable to afford the cost of living. It is unsustainable, harmful and does nothing to address the core cost-of-living issues."

When debt including unpaid BNPL becomes a problem it is often sent to a debt collector, after additional fees have been added and a collection agency takes over recovering the debt. It is no longer fee or interest free. This causes distress and harm - debt being collected that was unaffordable in the first place.

We strongly urge the Government to further consider the damage that is caused to families and communities by credit that is not appropriate or affordable, and ensure regulation is focused on reducing harm for those who are most affected.

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