Two services that help people out of debt can’t believe Auckland Transport (AT) is giving people the option of paying fines with buy now pay later (BNPL).
Janeka Rutherford-Busck from FinCap, the umbrella organisation for 900 financial mentors throughout New Zealand, said she was horrified to see BNPL service Zip offered as a payment option. She’d been hearing from mentors how clients were often struggling to pay AT fines when she came across the option on the website.
“It was pretty jarring,” she said. “We’d rather see council assisting people themselves rather than handing them over to a buy now pay later lender.”
The option lets people pay only a quarter of their fine before it’s due and pay off the rest over six weeks. AT, the Auckland Council-controlled organisation responsible for the city’s transport services, said it made an arrangement with Zip that fines wouldn’t be charged if people missed payments.
Rutherford-Busck said while that was reassuring, she still worried it could introduce people to a currently unregulated form of lending and start them on a cycle of buying essentials with it and struggling to keep up with payments.
“You go on to the website and straight away see you can buy things from a pharmacy or meat,” she said.
Christine Liggins from Debtfix, which offers free help to get people out of debt, said she was shocked to hear of buy now pay later being used to pay fines.
“Oh my goodness, on what level is that right? Does Auckland Council not understand what these services do? I understand it’s the more cost-effective option to farm it out, but it’s so wrong.”
She’s also worried it would start people on buy now pay later who otherwise wouldn’t have considered it.
“It’s an open gateway. This person might never have thought of using it and suddenly they get a fine and see ooh, you can pay it over six weeks! And now I can get some new shoes and some clothes, not realising there are costs involved when you miss a payment.”
She urged AT to reconsider and do their own payment plan.
“They should be letting people pay $10 a week to them if they’re worried, not sending them off to a creditor.”
AT spokesman Blake Crayton-Brown said they had looked into setting up their own staggered payment option, but “this was ruled out due to the excessive cost of developing such a platform and integrating it with our existing systems”.
He said 5 percent of infringements were paid by Zip and 98 percent of people made all four payments on time.
“Rather than contributing to financial harm, we believe this payment option has helped to minimise harm, as it has given Aucklanders a fee-free and interest-free payment option.”
Crayton-Brown said using Zip gave people an alternative over going into credit card debt or resorting to a payday lender.
“Although some people do hold concerns about buy now pay later type payment options, for many they are an increasingly normal part of life, just like credit cards have been for decades.”
Liggins said the organisation should not be normalising buy now pay later and should consider making a donation to financial mentoring services with the money it had saved.