Alcohol buyers are being targeted by Buy Now Pay Later services, which should be better regulated - a financial expert says. Photo: Unsplash
Buy Now Pay Later providers are targeting alcohol merchants and products because of sector deregulation and the weak economy, a credit risk adviser says.
Last month the government removed some consumer protections to allow Buy Now Pay Later (BNPL) schemes to set late or default fees as they see fit.
The government argued market competition and the Fair Trading Act was enough to prevent providers exploiting consumers.
But credit risk advisory firm Happy Prime chief executive Meurig Chapman said without ethical and responsible lending guidance these schemes have free rein on the market.
He said this was increasing harm for people using BNPL to survive the economic downturn.
"Over the last year, increasingly, providers of buy now pay later services have been targeting merchants such as off licenses with buy now pay later product... and I think it's increasingly started to materialise with the challenges we're having in the economy around the struggle of consumers to pay for everyday transactions
"I think that buy now pay later providers are seeing an opportunity to provide their services."
A search for "alcohol" on the Afterpay New Zealand website returns 100 results, including liquor stores, alcohol brands and gift box shops, while Zip has three results.
Chapman said BNPL needed to be regulated the same way as other forms of credit, to protect consumers.
"Increasingly we're start to see more and more people using buy now pay later, and they're missing their repayments and are subject to fees from those providers."
A statement from the Ministry of Business Innovation and Employment, the agency responsible for the CCCFA [the Credit Contracts and Consumer Finance Act], said the government was taking a balanced approach to BNPL "to give consumers greater protections and minimise the risk of lending causing hardship, while retaining the benefits of BNPL services and the extra choices these provide to consumers".
It said BNPL was similar to credit cards that could be used to purchase many consumer goods, including alcohol.
"The regulations provide BNPL consumers many of the same protections as other forms of borrowing, such as credit cards and personal loans. However, BNPL providers are able to rely on comprehensive credit checks to check affordability, rather than requiring full affordability checks, and will not be subject to certain fee provisions under the CCCFA."
RNZ has contacted Afterpay and Zip for comment.
