Pay later alcohol sales spark concerns

The poor state of the economy has Buy Now Pay Later providers targeting alcohol merchants and products, according to a credit risk adviser.

In September the government introduced regulation for Buy Now Pay Later (BNPL) businesses for the first time under the Credit Contracts and Consumer Finance Act (CCCFA).

It means BNPL providers must comply with responsible lending rules, conduct credit checks, disclose fees and offer dispute resolution.

But it still allows schemes to set late or default fees as they see fit.

The government argued this exemption ensures business viability, while market competition and the Fair Trading Act prevents providers exploiting consumers.

Credit risk advisory firm Happy Prime chief executive Meurig Chapman said before the lending guidance BNPL schemes had free rein on the market.

He said this has increased 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 licences 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 providers should not be exempt from the CCCFA's fee provisions that limit how default penalties are calculated.

He said they should be regulated the same way as traditional credit, to protect consumers from hefty fees.

"Increasingly we're starting 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, 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."

In a statement Afterpay said the government's regulations of BNPL ensure credit providers lend responsibly and allow consumers to make informed decisions.

"In fact, 95 percent of all Afterpay instalments are paid on time and 98 percent of purchases incur no late fees, according to our Q3 2024 results," it said.