Stock Takes Podcast: Why putting a lounge suite on buy now pay later could be off the cards

Regulation of the buy now pay later sector could make it harder to make large purchases like furniture.

It’s likely to be harder for consumers to put large ticket items on buy now pay later and there may be fewer providers offering the interest-free payment service under proposed regulation.

Consultation closed earlier this month on a proposal to bring buy now pay later services under the Credit Contracts and Consumer Finance Act with a cap of $600 allowing smaller purchases to be made without a borrower having to go through a full credit check.

Gemma Rasmussen, head of research and advocacy at Consumer New Zealand, told the Stock Takes podcast that Consumer isn’t keen on the $600 cap and believes all debt should have to go through some form of affordability check although a lighter regime would be more appropriate.

But banks and finance companies says different treatment for buy now pay later borrowing would create an uneven playing field.

Rasmussen says if the regulation is too hard it may see more providers exit the New Zealand market. Two have already pulled out while a third company has gone bust.

She says it’s hard to say what the future of buy now pay later will look like.

“If there is one thing that we know from recent years is that things have never been more volatile than they have and the thing about buy now pay later is it hasn’t been around for that long.”

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Buy now pay later offerings began to hit the New Zealand market in 2016 but it was 2019 when they began to expand quickly followed by a meteoric rise during the Covid years.

“The companies have done really well, now they are starting to fall back and some of them are hurting so it will be interesting with this introduction of regulation what they land on to see how that actually impacts the New Zealand retail landscape and the way in which people are shopping,” Rasmussen said.

Rasmussen says whichever way it goes it is going to be a little bit more conservative for shoppers.

“Hopefully for those that have been using it really successfully they will continue to see a lot of retailers offering it and they will be able to use it as a budgeting service.”

But she also hoped it would become a safer space for consumers that fewer financial mentors were concerned about it.

“If at very worse there were a few less players and maybe you couldn’t buy a lounge suite but it was able to help you with a few everyday things I think that possibly wouldn’t be such a bad thing.”

Listen to the full podcast for more from Rasmussen on the changes coming to the industry.

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