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Buy Now, Pay Later (Afterpay/Laybuy): Consumer protections

Key Takeaway

In New Zealand, purchases made using Buy Now, Pay Later (BNPL) schemes are protected by the Consumer Guarantees Act 1993, ensuring goods and services meet acceptable standards. The Fair Trading Act 1986 also prohibits misleading conduct by retailers and BNPL providers. Consumers retain rights regarding product quality and accurate information, regardless of the payment method.

Buy Now, Pay Later (Afterpay/Laybuy): Consumer Protections in New Zealand

Buy Now, Pay Later (BNPL) schemes, such as Afterpay and Laybuy, allow consumers to purchase goods or services and pay for them in instalments, often without interest. While these services offer payment flexibility, consumers in New Zealand are still protected by key legislation regarding the quality of goods and services, and fair business practices.

Application of the Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 (CGA) is a New Zealand law that provides consumers with guarantees regarding the quality of goods and services they purchase for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 4]. These guarantees apply regardless of the payment method, including when a Buy Now, Pay Later scheme is used.

Guarantees for Goods

When goods are supplied to a consumer, the CGA provides several guarantees, including:

  • Acceptable Quality: Goods must be of acceptable quality, meaning they are fit for all the purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Fit for Particular Purpose: Goods must be fit for any particular purpose that the consumer makes known to the supplier, either expressly or by implication [Source: Consumer Guarantees Act 1993, s 7].
  • Match Description: Goods must correspond with any description given by the supplier [Source: Consumer Guarantees Act 1993, s 8].
  • Match Sample or Demonstration Model: If goods are supplied by reference to a sample or demonstration model, they must correspond with that sample or model in quality, state, or condition [Source: Consumer Guarantees Act 1993, s 9].

Guarantees for Services

When services are supplied to a consumer, the CGA provides guarantees, including:

  • Reasonable Care and Skill: The services must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fitness for Particular Purpose: The services, and any product resulting from the services, must be fit for any particular purpose the consumer makes known to the supplier [Source: Consumer Guarantees Act 1993, s 29].
  • Reasonable Time: The services must be completed within a reasonable time where no specific time has been agreed upon [Source: Consumer Guarantees Act 1993, s 30].
  • Reasonable Price: The services must be supplied at a reasonable price where no specific price has been agreed upon [Source: Consumer Guarantees Act 1993, s 31].

Remedies Under the CGA

If goods or services fail to meet a guarantee, a consumer is entitled to remedies. The nature of the remedy depends on whether the failure is minor or substantial:

  • Minor Failure: For a minor failure, the supplier can choose to fix the problem (e.g., repair, replace, or refund for goods; remedy the service) [Source: Consumer Guarantees Act 1993, s 19, s 33].
  • Substantial Failure: For a substantial failure, the consumer can choose to reject the goods or cancel the service, and may claim damages for any loss or damage resulting from the failure [Source: Consumer Guarantees Act 1993, s 21, s 35].

Generally, the consumer's primary recourse for faulty goods or services is against the supplier who provided them [Source: Consumer Guarantees Act 1993, s 18, s 32].

Application of the Fair Trading Act 1986

The Fair Trading Act 1986 (FTA) is a New Zealand law that prohibits misleading and deceptive conduct, false representations, and unfair practices by businesses [Source: Fair Trading Act 1986, s 9]. This Act applies to both the retailers offering goods and services, and the Buy Now, Pay Later providers themselves, regarding their marketing, terms, and overall conduct.

Prohibited Conduct

Key prohibitions under the FTA include:

  • Misleading or Deceptive Conduct: No person in trade shall engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This applies to advertisements, pricing information, and descriptions of goods, services, or BNPL terms.
  • False or Misleading Representations: No person in trade shall make a false or misleading representation regarding the nature, characteristics, suitability, quantity, or uses of goods or services, or the price of goods or services [Source: Fair Trading Act 1986, s 13]. This includes representations about the terms and conditions of a Buy Now, Pay Later arrangement.
  • Unfair Contract Terms: The FTA allows a court to declare a term in a standard form consumer contract to be an unfair contract term if it causes a significant imbalance in the parties' rights and obligations, is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term, and would cause detriment to a party if applied or relied on [Source: Fair Trading Act 1986, s 46H, s 46J]. While this does not automatically void a term, it can lead to it being unenforceable.

Obligations of Consumers to BNPL Providers

When entering into a Buy Now, Pay Later agreement, consumers are generally obliged to meet the payment terms set out in their agreement with the Buy Now, Pay Later provider. Failure to do so may result in late fees, account suspension, or other consequences as stipulated in the BNPL provider's terms and conditions.

Dispute Resolution

If a consumer has an issue with goods or services purchased using a BNPL scheme (e.g., they are faulty or not as described), they should first contact the retailer or service provider to seek a remedy under the CGA. If the dispute relates to the BNPL service itself (e.g., charges, misleading information about the payment plan), the consumer should contact the BNPL provider.

Many Buy Now, Pay Later providers are financial service providers and are required to belong to an approved dispute resolution scheme [Source: Financial Service Providers (Registration and Dispute Resolution) Act 2008, s 48]. If a complaint cannot be resolved directly with the BNPL provider, the consumer may be able to escalate their complaint to an external dispute resolution scheme such as Financial Services Complaints Ltd (FSCL) or Financial Dispute Resolution Service (FDRS).

When to Seek Independent Legal Advice

Individuals facing complex disputes with retailers or Buy Now, Pay Later providers, or who require clarification on their specific rights and obligations under New Zealand consumer law, should seek independent legal advice. Information on legal processes and assistance can be obtained from community law centres or by consulting a qualified legal professional. Community Law Centres offer free legal advice to those who qualify based on their income and legal needs.

Key Resources