Key Takeaways
- Afterpay generated roughly NZ $19.7 million in late‑fee revenue in New Zealand for the 2024‑25 financial year, up from NZ $18.5 million the previous year, despite advertising itself as an interest‑free service.
- Late‑fee structure: a one‑time fee of up to 25 % of the order value for purchases ≤ NZ $40; for larger orders a NZ $10 fee on the first missed instalment, followed by an additional NZ $7 after seven days, with a cumulative cap of 25 % of the borrowed amount or NZ $68, whichever is lower.
- Arrears in the broader buy‑now‑pay‑later (BNPL) sector improved to 8.8 % in April 2025, ending a streak of monthly increases.
- Since September 2024 BNPL providers have been brought under the Credit Contracts and Consumer Finance Act (CCCFA), but they received exemptions from sections 41 (prohibiting unreasonable fees) and 44A (requiring default fees to reflect actual costs).
- Consumer NZ argues these exemptions weaken consumer protection, allow multiple late fees to stack, and fail to curb unaffordable lending or the associated financial hardship, especially for essentials and alcohol purchases.
- FinCap highlights the risk of a debt “treadmill” where consumers fall further behind on essentials after paying late fees, and urges earlier engagement with lenders or free help lines such as MoneyTalks to avoid collection actions.
- Both Consumer NZ and FinCap call for urgent regulatory attention, including licensing debt‑collection practices and revising BNPL fee rules once the broader Financial Services Reform legislation passes Parliament.
Afterpay’s Late‑Fee Income in New Zealand
Afterpay, a leading buy‑now‑pay‑later (BNPL) platform, reported approximately NZ $19.7 million in income derived from late fees for the year ending December 2024. This figure represents a notable increase from the NZ $18.5 million recorded in the prior 12‑month period. The revenue stems exclusively from penalties imposed when shoppers miss scheduled instalments, even though the core Afterpay service advertises itself as “interest‑free.” Merchants, not consumers, pay the transaction fee to Afterpay; the consumer‑side charges arise only when payments are delayed.
How Afterpay’s Late‑Fee Structure Works
The fee schedule is tiered based on the purchase amount. For orders valued at NZ $40 or less, a single late fee of up to 25 % of the total purchase price can be applied the moment an instalment is missed. For purchases exceeding NZ $40, the system levies an initial NZ $10 fee when a payment is late. If the outstanding amount remains unpaid after a further seven days, an additional NZ $7 charge is added. This process can repeat, but the total late‑fee exposure is capped at the lower of 25 % of the borrowed amount or NZ $68. Consequently, a consumer who repeatedly misses payments on a large purchase could still face a substantial penalty, albeit limited by the cap.
Year‑on‑Year Growth and Sector‑Wide Arrears Trends
The rise in Afterpay’s late‑fee earnings coincides with a modest improvement in overall BNPL arrears. Data from Centrix for April 2025 showed that the sector’s arrears rate had fallen to 8.8 %, breaking a consecutive run of monthly increases. While this suggests some stabilization in repayment behaviour, the simultaneous growth in fee revenue indicates that a smaller proportion of users may be incurring higher penalties, or that the fee structure itself is generating more income per delinquent account.
Regulatory Shift: BNPL Under the CCCFA
Starting in September 2024, BNPL providers such as Afterpay were brought under the ambit of the Credit Contracts and Consumer Finance Act (CCCFA), New Zealand’s primary legislation governing consumer credit. This move aimed to extend the same consumer‑protection standards that apply to credit cards, personal loans, and hire‑purchase agreements to the rapidly expanding BNPL market. However, the regulatory package included targeted exemptions for BNPL firms: they were relieved from compliance with section 41, which bars unreasonable fees, and section 44A, which mandates that default fees reflect the actual costs incurred by the lender.
Consumer NZ’s Critique of the Exemptions
Gemma Rasmussen, a spokesperson for Consumer NZ, warned that these exemptions substantially weaken consumer protection. Because late fees no longer need to mirror genuine costs, providers can impose charges that are disproportionate to any administrative loss. Moreover, the rule allowing multiple late fees to apply simultaneously across different purchases can lead to rapidly escalating debt burdens. Rasmussen argued that, despite the formal inclusion of BNPL within the CCCFA framework, the reforms have failed to address the core drivers of consumer harm—namely, over‑commitment and financial hardship. She noted that hardship cases linked to BNPL continue to climb, and that the use of BNPL for essentials such as groceries, petrol, and even alcohol remains widespread, exposing vulnerable households to additional financial strain.
FinCap’s Perspective on the Debt Treadmill
Jake Lilley, representing FinCap, echoed these concerns, emphasizing the practical impact on everyday households. He described a scenario where a consumer incurs a late fee on a purchase of essential items like petrol or food. The fee effectively reduces the amount of money available for future essential purchases, pushing the individual further behind and potentially triggering a debt “treadmill”—a cycle in which each missed payment leads to higher fees, making it increasingly difficult to catch up. Lilley pointed out that financial mentors working with whānau (extended families) report that repaying BNPL debts is adding pressure to those merely trying to keep food on the table and maintain basic living standards.
Mitigation Strategies and Calls for Action
Both Consumer NZ and FinCap advocate for earlier intervention as a key mitigation strategy. They encourage borrowers who anticipate difficulty meeting instalments to contact their BNPL provider promptly or to reach out to free, confidential support services such as the MoneyTalks helpline. Early communication can often lead to revised payment plans, temporary forbearance, or other arrangements that prevent the account from progressing to formal debt‑collection processes. Lilley also highlighted the need to licence debt‑collection activities related to BNPL, arguing that oversight would curb abusive collection practices and ensure that any recovery efforts are fair and transparent.
Outlook and Regulatory Recommendations
Looking ahead, the commentators agree that urgent regulatory attention is required. They recommend that, once the broader Financial Services Reform legislation clears Parliament, policymakers revisit the BNPL fee exemptions imposed under the CCCFA. Specific suggestions include:
- Re‑instating a requirement that late fees reflect actual costs incurred by the lender, aligning BNPL with other consumer‑credit products.
- Limiting the stacking of multiple late fees across separate transactions to prevent exponential debt growth.
- Imposing clearer caps on total fees relative to the principal borrowed, ensuring that penalties remain proportionate.
- Mandating early‑warning mechanisms that trigger when a consumer misses a payment, prompting automatic offers of assistance or flexible repayment options.
- Strengthening oversight of debt‑collection practices specific to BNPL, potentially through a licensing regime similar to that applied to traditional credit collectors.
By addressing these gaps, regulators could preserve the convenience and accessibility that BNPL offers while safeguarding consumers from the financial pitfalls that have begun to emerge, as evidenced by Afterpay’s growing reliance on late‑fee revenue. The ultimate goal is to foster a credit environment where interest‑free convenience does not come at the expense of financial wellbeing.