Afterpay New Zealand today announced new and existing customers will be requested to consent to mandated credit checks, which will begin from 23 July. Credit checks will be closely followed by credit reporting, which will begin as of 15 August.
Mandated credit checks and credit reporting are key elements of the new responsible lending framework for the Buy Now Pay Later sector, which comes into force on 2 September 2024. They compliment the consumer protections inherent in Afterpay’s product, like stopping customers from spending if they have missed a repayment.
Michael Saadat, Head of International Policy at Afterpay, said: “Afterpay has been working diligently to comply with the new – and world-first – regulations designed specifically for the BNPL sector, which we welcomed in August 2023.
“As we begin compliance ahead of schedule, we want to be upfront and transparent with our customers about what changes are being made as they continue using our service to manage their spending responsibly and achieve their financial goals.
“Importantly, our customers continue to use our product to meet their financial needs. In Q1 2024, 98% of purchases did not incur late fees and 95% of instalments were paid on time across Afterpay globally.
“The new and proportionate regulatory requirements will support financial inclusion as more and more consumers choose a better, genuine alternative to high-interest credit cards that profit from revolving cycles of debt.”
Credit checks and credit reporting: what it mean for customers
Existing Afterpay customers – those who have an open account – will undergo what’s called a soft credit check, which will not appear on credit files and it will not affect a customer’s credit score. The purpose of this check is to assess whether a spend limit increase is right for the customer.
New customers will go through a hard credit check at onboarding. This will appear on a customer’s credit file and provide a sense of any outstanding debts so that a customised spending limit can be provided.
Once new and existing customers have undergone the appropriate credit check stage, credit reporting will begin from August 15. Credit reporting will occur at least monthly with information shared with the credit bureaus that may include account details such as the account open date, on time repayment status or if there is an overdue status. As the credit bureaus begin to receive this information, more information will be provided on how exactly BNPL data will play a role in the credit scores of customers.
World-leading Paywatch also continues to support Kiwi BNPL customers
In 2023, Afterpay, along with other BNPL providers, partnered with New Zealand’s local credit bureau, Centrix to launch PayWatch – a world-first initiative designed to help protect consumers with the ability to share overdue account data daily and flag when a consumer is behind on repayments. This initiative will continue alongside the new regulatory framework to create a robust and comprehensive view of how Kiwis are engaging with BNPL.
Afterpay customers can learn more about the updates to the New Zealand experience and answer questions they may have here.
