Buy Now, Pay Later sector inching closer to CCCFA regulation

  • Legal update

    03 November 2022

Buy Now, Pay Later sector inching closer to CCCFA regulation Desktop Image Buy Now, Pay Later sector inching closer to CCCFA regulation Mobile Image

New Zealand’s Buy Now, Pay Later (BNPL) sector is in for a shake-up. Yesterday, the Minister of Commerce and Consumer affairs, Minister of Commerce and Consumer affairs, Hon Dr David Clark, announced new regulations will be introduced which will see BNPLs covered by the Credit Contracts and Consumer Finance Act 2003 (CCCFA). This is after discussion in overseas jurisdictions such as the United Kingdom and Australia with regulating BNPL services.

The announcement foreshadows the affordability regime under the CCCFA to BNPL products over a certain threshold (proposed at $600). Products which fall under the proposed threshold will also be impacted by the change, with the announcement stating that “comprehensive credit reporting will need to occur” for those products under the proposed threshold.

Traditional BNPL products are not subject to many of the more onerous aspects of the CCCFA (as they do not meet the strict definition of a “consumer credit contract”). Extending the CCCFA to BNPL products means borrowers will benefit from some of the same protections as those who enter into credit cards and personal loans with traditional bank lenders.

The Ministry of Business, Innovation and Employment’s (MBIE) online announcement also foreshadows the following additional changes to the BNPL sector:

  • General lender responsibilities will apply, including in respect of informed decision making.
  • Borrowers will be protected from unreasonable default fees.
  • Borrowers facing unforeseen hardship can apply to the lender to have their repayment contract varied.
  • BNPL providers will be required to have hardship processes in place and be registered with an external disputes resolution scheme.
  • BNPL providers will be required to provide information to borrowers who miss payments about financial mentoring services.
  • BNPL providers will have to disclose key information and any variations.
  • Directors and senior managers will need to be certified fit and proper by the Commerce Commission and will be subject to due diligence duties.
  • BNPL providers must disclose repayment schedules and late fees when every purchase is made and not just when the contract is entered into (this disclosure will apply specifically to BNPL providers).

The proposed regulatory changes to BNPL products may have flow-on implications for the many online businesses and marketplaces which allow their customers to use BNPL products to purchase goods and services. These may include managing compliance risks through contracting arrangements with BNPL providers, as well as updating website functionality to appropriately filter and manage transactions above relevant thresholds in line with BNPL compliance requirements.

MBIE aims to commence consultation on the details of the regulations, including the proposed threshold of $600 and what parts of the CCCFA will apply above the threshold, later this year. Final regulations are anticipated to follow in 2023.

If you have any questions about how this may affect your business, please to get in touch with one of our experts.

This article was co-authored by Sarah Redding, a Senior Solicitor in our Corporate and Commercial team and Travis Mackie, a Solicitor in our Banking and Financial Services team.