BNPL providers, beware! A new consumer credit directive is on its way and could impact your business.
For a few years, ‘buy now, pay later’ solutions (‘BNPL’) have been mushrooming, especially online.
The concept is simple: consumers purchase a good or a service but pay for it later (in one or several instalments).
Most BNPL solutions fall outside the scope of EU consumer credit rules of conduct. Why? Because the current directive does not apply to credits meeting (all) the following conditions:
- no interest;
- repaid within a maximum of three months;
- no or only very low costs are charged.
Note that these conditions have been implemented with some differences in some member states. Belgium, for example, requires the credits to be reimbursed within two months instead of three.
So far, BNPL solutions had remained a blind spot as they did not exist as such when the current regulation was issued, but they have now caught the EU legislator’s attention.
A proposal for a new (second) consumer credit directive is currently being discussed and one of its goals is to regulate BNPL solutions that are currently benefitting from an exempt regime: “Buy Now Pay Later schemes, i.e. new digital financial tools that let consumers make purchases and pay them off over time […] should not be excluded from the scope of application of this Directive” says recital (15) of the current draft.
BNPL providers should be wary of upcoming changes and assess the viability of their current products and customer journeys, should this draft text be confirmed.
If BNPL solutions become as regulated as traditional consumer credits, BNPL providers who currently benefit from the aforementioned exemption will face a new regulatory burden:
- strictly regulated marketing practices,
- an important set of pre-contractual information duties with an influence on the customer journey,
- credit checks, etc.
Unregulated BNPL providers may also be subject to obtaining a creditor licence and, in Belgium at least, the BNPL model contracts may need to be reviewed by the Federal administration (FPS Economy) prior to using them, just like any other regulated consumer credit product.
Our Digital Finance team is available to answer all your questions: firstname.lastname@example.org.
This article is not legal advice or opinion. You should seek advice from a legal counsel of your choice before acting upon any of the information in this article.