Cash-strapped Christmas shoppers thinking of taking advantage of attractive-looking Buy-Now, Pay-Later (BNPL) services should take care, according to Mahurangi-based debt resolution service Debtfix.
Debtfix director Christine Liggins says it is had to help a number of people entering into too many BNPL contracts and getting into trouble.
She says BNPL looks attractive because you can go around shops and use this method of payment in nearly every one of them.
“BNPL companies give you the convenience and buzz of immediately taking ownership of the goods when you can’t pay for them,” Ms Liggins says.
But she says BNPL companies may require an establishment fee to open an account and there can be ongoing administration fees.
“In New Zealand, you have from five to nine weeks to pay off your debt, and if you are late making payments, you will be charged penalties,” she says.
A Consumer NZ survey conducted earlier this year found BNPL services are costing shoppers more than $10 million a year in late fees.
Consumer says close to four out of 10 Kiwi consumers use BNPL services such as Afterpay, Laybuy and Zip.
Mrs Liggins says the relaxed lending approach might appeal, but adding to your mounting debt could be worse for you than “not being able to buy a new outfit or the latest smartphone”.
Debtfix’s comments come after the Government asked New Zealanders to share their experiences of BNPL earlier this month.
Consumer Affairs Minister David Clark says the Government is exploring if more needs to be done to mitigate the risk of consumer harm.
Unlike credit cards and other forms of consumer credit contracts, BNPL providers are not required to comply with the rules under current consumer credit contract legislation.
“I have heard from financial mentoring organisations that BNPL is creating financial hardship for some people. It is important to understand the extent of those harms and the actions that might best address them,” Dr Clark says.
To make a submission on BNPL, visit https://www.mbie.govt.nz/have-your-say/bnpl/. Feedback closes on December 16.