A stolen identity and mysterious debt has left an Auckland man worried about the ease of use of Buy Now Pay Later schemes – and relieved that Fair Go could help him with his problem.
“If I were to lend someone money, I would want to make sure they are what they are and will pay them back,” says Beau Dobson.
Dobson discovered in September 2021 that someone had used his driving license details two years earlier to open an account with Laybuy, a New Zealand-based lender that offers Buy Now Pay Later or BNPL.
At the time, they bought a cell phone, leaving over $700 on Laybuy unpaid. Around the same time, someone opened a store credit card in Dobson’s name with the same stolen details and racked up nearly $5,000 in debt.
When this finally went to Baycorp for collection, Beau received a call at work and the first idea that this had all happened to him.
“It gets your heart pumping. First you think about what’s going on here, and then from there you’re in recovery mode and trying to figure out what to do to fix the problem.”
The biggest debt with the store card was quickly investigated and cleared, but Laybuy held firm, insisting that Dobson pay for the phone he knew nothing about.
Dobson spent six months trying to clear his name and credit report and only succeeded after Fair Go took his case to the top at Laybuy, hounding his Kiwi co-founder and chief executive, Gary Rohloff. , on a business trip to London.
“Look, there’s always room for improvement,” Rohloff told Fair Go, who insists his team made the right call at the time with the information he says he has.
“We are a fast moving business and in this situation our process has let us and the consumer down and we need to fix it.”
Dobson was still unsure after a Laybuy employee emailed him saying he still had no evidence of fraud, but a goodwill gesture would clear any debt.
However, Roholoff assured Fair Go in a video interview from London that his company would erase Beau’s credit records to clear the default he entered there.
“When I come back to New Zealand, I would love to meet him for coffee and apologize,” Rohloff told Fair Go.
Rohloff insists that no regulations would prevent criminals from stealing people’s identities and misusing them, but Dobson’s case has raised questions about the ease of access to BNPL and the opportunity for stricter regulation.
Whoever opened this account had only to provide a driver’s license number matching Dobson’s name on the central government file; Laybuy did not check the address on it to see if it matched Dobson’s address on his credit file. This could have flagged the app for further verification or suggested someone was trying to steal his identity.
The programs have only been around for about five years and eschew consumer credit agreements and finance law because they don’t charge interest even though they lend money.
Rohloff told Fair Go that Laybuy processes more than $1 billion in transactions on an annualized basis in New Zealand, Australia and the UK – all countries where regulators are considering tougher industry regulation. emerging.
“We provide a very smooth service,” says Rohloff.
“I am in favor of proper regulation; it just has to maintain the usefulness of the product.”
He says BNPL’s average transaction is around $150 and the average credit limit is $240. He also refused to allow Laybuy customers to borrow for groceries or alcohol.
Fair Go has had reports of people using other BNPL programs to buy meat, a sure sign that there is little affordability checking when signing up customers.
“We think it’s like the Wild West there, without regulation,” says FinCap chief executive Ruth Smithers.
She points to the late fees charged by the schemes which represent about a quarter of their income and the absence of a legal obligation to carry out an assessment of the affordability of a new client.
“They’re already in a position where they can’t repay a loan and yet they can easily access the ones they buy now to pay later. It ends up spiraling into debt to get out of it. day to day,” says Smithers.
She met Trade Minister David Clark this month to push for BNPL lenders including Laybuy, Afterpay, Zip, Humm and others to be included in safe lending laws that cover forms more established financing options such as credit cards, car loans and bank loans. FinCap also wants it to cover telecom carriers like Spark, Vodafone and 2degrees who sell people expensive cell phones on a one to three year plan included in their phone bill, another form of loan which is largely unregulated.
“It’s an anomaly that they’re not covered by the safe lending regulations. Any one of us could find ourselves in a situation where we’re struggling to pay our bills. What we really want are safe lending practices that apply to all lenders, including Buy Now, Pay Later.”
A spokesman for Minister Clark told Fair Go that any decision on BNPL is expected to come mid-year, but this is “actively being discussed” at the moment.