The problem with buy-it-now, pay-later programs, says a lending expert
But Natalie Vincent, CEO of Ngā Tāngata Microfinance, which offers interest-free loans to families with limited incomes who need help repaying their debts, doesn’t think the industry can regulate itself.
“They’re asking for a code of conduct, but who would actually oversee that? Would they set up a compliance committee, who knows,” she told The Project on Tuesday.
“But essentially it’s then the industry monitoring the industry, and I just don’t think when you’re dealing with something as serious as that…that they can actually monitor themselves.”
Vincent estimates that one in four people who come to his business for a loan are part of a buy it now, pay later program, and more and more people are using the system to buy essential goods for the life.
“The problem with buy now, pay later is that people don’t see it as debt, they don’t see it as credit, and it is credit,” she said.
“You walk into any store and you walk out with an item that has monetary value, you’re indebted to the department to pay for that item. So that’s a credit and that’s a debt, and if you’re not not able to repay that, it incurs costs, and in the worst case, it ends up with a debt collector, who incurs more costs.”
Buy now, pay later is becoming a growing problem for the people she helps.
“The reason we see this as a growing problem is because the people we work with are already in deep debt, so they’re in a situation where they’re trying to manage problematic debt, and often they have to buy now pay later services on top of that existing debt, so it just starts to spiral out of control.”
Watch Vincent’s full interview on The Project above.