Financial mentors and FinCap have been sounding the alarm around harm from Buy Now Pay Later lending in our communities for some time and today Minister Clark announced action to better regulate this lending.
We welcome the announcement by Minister Clark that the Government is moving to make Buy Now Pay Later lenders more accountable by applying some key protections from our safe lending laws.
These requirements on the table include proper standards for disclosure, affordability assessments and support for borrowers facing hardship. The changes could mean that Buy Now Pay Later loans are effectively regulated just like any other loan when $600 or more is on offer.
FinCap CE Ruth Smithers says,
“Buy Now Pay Later lenders have been triggering debt spirals, pulling in a quarter of their revenue from late fees and sending whānau into unfair debt collection.
Based on what we have seen so far, the announcement today is a huge step forward. It is great to see some action that should take the most egregious lender conduct out of this rapidly growing market.
However, it appears there will still be a loophole open for lending under $600 that will never be affordable. We will keep working closely with financial mentors to understand the impact of the changes, and we will continue to call for the Government to close all loopholes.
Every day financial mentors have been telling FinCap that these loans need to be regulated just like any others. $600 is a lot of money for a lot of whānau in Aotearoa.”
Now FinCap will be focussing its attention directly on the lenders themselves. Smithers continues,
“We call on all Buy Now Pay Later lenders to do the right thing from today, by immediately implementing proper checks so that all lending is not unaffordable from the start.
Instead of waiting for the final drafting of changes, these lenders need to stop turning a blind eye to the harm they are causing in communities. Financial mentors are already under resourced and have been strained by having to step in to unwind this harm.”
FinCap is also calling for action on unfair debt collection that arises from this and many other industries.
“We also note that when there is action from Government to prevent unmanageable debt arising, there is an inevitable hangover from previous lending. This leftover debt in the system regularly results in unfair debt collection that seriously impacts the wellbeing of whānau.
We now need the Government to bring regulation of debt collectors up to international standards in Aotearoa. This should ensure whānau are not being coerced into prioritising payments for Buy Now Pay Later debt before putting kai on the table,” Smithers adds.