Afterpay, Zip, and Laybuy have signed up to the scheme
A new initiative has been launched to stop buy now, pay later (BNPL) providers from “unintentionally” lending money to people who are unable to pay it back.
BNPL is a type of short-term, interest-free financing not covered by responsible lending laws.
Unlike mainstream lenders, some BNPL providers don’t do credit checks, resulting in vulnerable people opening multiple BNPL accounts when they were behind on repayments with other BNPL lenders.
Centrix has partnered with Afterpay, Zip, and Laybuy, which together accounted for roughly 90% of BNPL market, to launch Paywatch, which allows BNPL lenders to notify Centrix when one of their borrowers is behind on repayments, stuff.co.nz reported.
By using Paywatch, BNPL lenders can check whether the people to whom they are considering lending money are behind on existing payments with other BNPL providers.
Centrix data showed that around 10.5% of all BNPL accounts were in arrears at the end of March, with borrowers having missed repayments.
Centrix chief operating officer Monika Lacey (pictured above), told stuff.co.nz that PayWatch should help lower the number of people getting further into debt.
“Our goal is for all BNPL providers in Aotearoa New Zealand to opt into PayWatch to combat the accumulation of debt by those who face financial difficulty and support healthy consumer relationships with credit products,” Lacey said.
Gary Rohloff, Laybuy managing director, said PayWatch would provide BNPL lenders with a clearer picture of an applicant’s credit history and ensure they were not “unintentionally extending credit to vulnerable consumers” who couldn’t afford to pay the loan.
“While Laybuy has always reported its credit data, this hasn’t always been the case with some other BNPL providers,” Rohloff said. “The launch of PayWatch prevents this and greatly reduces the chances of vulnerable consumers falling into a debt spiral by jumping from provider to provider when they fall behind in their payments.”
He said that by always credit-checking every new customer, and providing information on customer repayments to Centrix, Laybuy has seen its New Zealand default rate “remain both very low and stable at under 1.5% of GMV despite a difficult economic environment.”
The government is currently considering draft government regulations that would force lenders to do full responsible lending affordability checks when lending more than $600 to someone.
But some financial mentors have argued that $600 was a large amount for lower-income people, and as people could open multiple accounts, could lead to harm, Stuff reported.
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