Buy Now,

Pay Later

So, it’s really hard for fiscal institutions to put these kinds of services in a category, but different countries are making advancements in the regulation of these services.

In the UK, at the beginning of 2021, the Financial Conduct Authority (FCA)’s former interim chief executive Christopher Woolard suggested that BNPL products should become subject to FCA credit rules, requiring providers to carry out a hard credit check and affordability test when customers opt to pay in instalments. However, the BNPL services offered by the well-known players don’t require a credit agreement simply because it’s not a credit service, so they can be exempted from regulations for consumer credit lending.

Now, zooming into the US, fitting BNPL into its regulations is relatively challenging since laws differ from state to state. Overall, BNPL services are regulated by federal and state laws under consumer credit regimes, but this depends on how different the different definitions of credit covered by each state’s laws. The credit reporting system in the US is also leveraged for BNPL. Lenders may consult credit reporting bureaus to check the credit standing of the purchaser, which credit checks are subject to regulation under the US Fair Credit Reporting Act.

At a European level, the overall consensus of several policymakers is that BNPL providers (in particular Klarna) fall short of consumer ethics principles. Secretary-General of the Swedish Consumers’ Association, the European consumer rights group BEUC, Austrian consumer organization Arbeiterkammer are some of the entities that questioned the way BNPL companies meet their liabilities in terms of obligations against the law. The EU’s Consumer Credit Directive rules of which are currently under review by the Commission, and adoption of the consumer credit review is planned for the second quarter of 2021.

Another booming market for BNPL services is Australia, where for the longest time BNPL providers enjoyed a relaxed regime, as the provisions of the Australian National Consumer Credit Protection Act of 2009 does not apply to certain types of loans, including short-term interest-free credits, and the industry had to eventually adopt a self-regulatory approach. But the Australian Finance Industry Association (AFIA) announced on the 1st of March of 2021 that its Code of Practice for the BNPL sector has come into effect. According to them: “AFIA’s BNPL Code goes above and beyond the law in Australia, setting best practice standards for the sector and strengthening consumer protections. It does this while preserving customer choice to make purchases and payments in a way that suits their needs and preferences.”

A lot of brands have found that offering BNPL solutions can give them the flexibility to pursue their own charitable initiatives and boost their sales. These Payment options allow customers to afford items such as a commemorative T-shirt for example, from which some proceeds might also go toward a non-profit initiative.

So, with this, consumers are keener on supporting causes and charities that closely align with their values, and they are continuing to look for new ways to do so, and this includes doing business with companies and using payment methods that allow them to support these issues.

A recent example of this is the BNPL solution provider Afterpay that teamed with two charities to provide aid to those the pandemic has affected. Customers who use the payment method can donate to A Common Thread (a collaboration between the Council of Fashion Designers of America and the Vogue Fashion Fund) or Baby2Baby, which collects items and supplies for babies and distributes them around the globe. Consumers using the BNPL solution when making purchases online can contribute $1 towards either initiative, and Afterpay noted it plans to give $200,000 directly to the charities as well.