Despite marketing itself as “interest-free,” Afterpay is collecting nearly $20 million annually from late fees in New Zealand, highlighting the growing cost of buy-now-pay-later spending habits for consumers who miss repayments.
Under Afterpay’s model, shoppers avoid fees only if they stick to the repayment schedule, while retailers are forced to absorb transaction costs in exchange for offering the buy-now-pay-later service.
However, consumers who failed to meet their instalment deadlines were hit with penalty fees.
Afterpay’s financial results showed late-fee revenue climbed from $18.5 million in 2024 to $19.7 million last year.
Consumer NZ spokesperson Gemma Rasmussen said buy-now-pay-later providers were brought under the Credit Contracts and Consumer Finance Act in September 2024, as regulators moved to tighten oversight and curb the growing risks associated with easy-access consumer debt.
“As part of these changes, from November 2024, BNPL providers became exempt from section 41, which prohibits unreasonable fees, and section 44A, which requires default fees to reflect actual costs.”
“These exemptions mean that late fees no longer need to reflect the true cost incurred, multiple late fees can apply simultaneously across different purchases, and fee protections are weaker than those that apply to other consumer credit products.”
“We believe this exemption significantly weakens consumer protection and reduces consistency within the CCCFA framework. Combined with ongoing cost-of-living pressures, these weaker safeguards could have contributed to an uptick in revenue from late fees.”
She pointed to earlier research by Consumer NZ showing the reforms increased regulatory oversight and officially folded buy-now-pay-later services into the consumer credit system but still failed to tackle the underlying culture of easy debt and overspending driving financial stress for many households.
“Over-commitment and financial hardship were the central pre-reform concerns, and these still persist, with hardship cases involving BNPL continuing to rise. BNPL use for essentials and alcohol also remains widespread.”
“Although consumers now receive stronger legal protection in principle, structural gaps in the framework mean the reforms have not effectively reduced unaffordable lending or the associated financial harm.”
FinCap spokesperson Jake Lilley said the regulations require urgent tightening.
“When someone ends up paying a late fee on already used essentials like petrol or food, they end up even further behind trying to access essentials in the future. It risks a debt ‘treadmill’ that just keeps accelerating.”
“Financial mentors continue to be frustrated, telling FinCap that difficulty paying back buy-now-pay-later lenders is adding more pressure for so many of the whānau they support. These whānau are just trying to survive and keep food on the table.”
He said research conducted alongside Consumer NZ found many lenders were willing to offer repayment flexibility and practical support for borrowers struggling to keep up with payments.
“The earlier someone lets these lenders know they are having trouble or, alternatively, the earlier they contact free and confidential support via the MoneyTalks helpline, the greater the likelihood they can avoid debt collection issues or going without the essentials.”