“Admittedly if you continue to misuse a credit card over a longer period of time, then obviously, it could get more expensive.”
Credit card holders, however, are assessed under the Credit Contracts and Consumer Finance Act (CCCFA) to determine if they can afford repayments. Anyone can get BNPL, even if they have a string of defaults under their belts.
Gilbert and fellow academic Ayesha Scott have conducted extensive interviews with BNPL customers and are in the process of finalising their research.
“It can be used wisely,” says Gilbert.
Although only a small proportion of interviewees incurred fees, it was significant, says Gilbert, and certainly higher than some of the numbers the BNPL providers would suggest.
Those who got into trouble were using BNPL heavily and poorly, the AUT team noted.
Although not finalised, the AUT research suggested the customers most profitable for BNPL providers are the ones who shouldn’t be using this form of credit.
“There are certain types of people who probably shouldn’t be using buy now, pay later,” says Gilbert.
“It’s those sorts of people who are highly materialistic. And it’s those people who are perhaps more prone to impulse buying, which is the buy now, pay later target audience.”
A third group is the “live for today and don’t worry about tomorrow” people, says Gilbert.
“[Providers] make it nice and convenient. But those are the sorts of people who need to think really carefully before they use it.”
Younger people tend to love BNPL because it’s simple. According to Centrix figures, nearly two-thirds of credit-active New Zealanders aged 18 to 24 use BNPL.
According to the data, arrears for those aged 18 to 29 are typically around 12 per cent, which is higher than for other age groups.
BNPL can be useful for some consumers, says Massey University associate professor Claire Matthews.
She cites the example of someone who is setting up a flat and needs to buy big-ticket items such as furniture, or a family that needs new school uniforms at the start of the year.
She suggests buying one item at a time and paying it off over four weeks on BNPL before moving on to the next one.
I had a jaw-dropping moment when I read my colleague Tamsyn Parker’s article about BNPL in late March. She’d been comparing two pairs of jeans and told the shop assistant she could only buy one.
The shop assistant replied: “Why don’t you put it on Afterpay.” The casual approach to debt left me momentarily speechless.
I put that to University Of Otago senior lecturer in marketing Damian Mather, who says sales targets incentivise shop staff to manipulate the customer’s decision-making process in this way.
Mather says there are more ethical ways to operate BNPL than currently available in New Zealand. A model where the goods were held until they were paid for in full would be one.
The Ministry of Business, Innovation and Employment (MBIE) is currently considering submissions on its proposals to regulate BNPL further. Even though it’s widely regarded as debt, BNPL falls outside the wording of the CCCFA thanks to the fact there is no interest.
MBIE is considering imposing a threshold of $600 over which the affordability of the loan must be assessed. Yet the hardest hit, says financial mentor David Verry of North Harbour Budgeting Services, is those people who are using it for basics.
Submissions from financial mentors argue that excluding people borrowing less than $600 ensures that the most vulnerable consumers are not protected.
Many consumers have multiple BNPL loans. The BNPL providers argue they can self-regulate and are working with Centrix to bring in a system called Pay Watch where arrears would be flagged at the end of each day on a database available to other providers.
