‘Buy Now Pay Later’ Going to Have New Rules, Including a Max Amount of Outstanding Payments

Are you one of those many people who use ‘Buy Now Pay Later’ services like Atome?

There are going to be new rules surrounding such services to help protect consumers from ending up deep in debt.

What Are ‘Buy Now Pay Later’ Services?

‘Buy Now Pay Later’ (BNPL) services are getting super popular since many people are shopping online. Such services include Atome, ShopBack, and Grab.

By using these services, you’re able to split up the cost of something into three or four equal repayments with no interest. This means that you’re able to borrow for free in these short periods, which leads to concerns over people overspending and ending up in debt.

To address these concerns, the Singapore FinTech Association and industry players have developed the BNPL code, with the guidance of the Monetary Authority of Singapore.

Standards and Safeguards to Mitigate Risk of Debt 

The BNPL code will set out industry-agreed standards and safeguards, to protect BNPL users and mitigate their risk of debt accumulation.

According to the code, BNPL providers will not allow customers to accumulate outstanding payments of more than $2,000 at any given time. If customers do not pay on time, they will also suspend customers’ access to BNPL services.

Additionally, BNPL providers must cap fees at an agreed-upon level. They will communicate any additional charges clearly to consumers and will allow early repayment for purchases in full without any penalties.

Additionally, they must ensure their advertisements and promotions are not misleading or manipulative. They are forbidden from aggressive promotion, and cannot market services to customers who have opted to be excluded from such promotions.

What If Someone Ends Up In Debt?

If a customer is in a difficult financial situation, BNPL providers will consider waiving or deferring the payments.

The key word is ‘consider’, so don’t happily overspend and hope that you don’t need to pay your debt off. 

BNPL providers will also work out a mutually acceptable payment arrangement, and won’t initiate bankruptcy proceedings.

Of course, we hope that nobody gets to that point of debt. 

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Credit Sharing Bureau

You might ask: how can BNPL providers know how much debt you have across all the different platforms?

Simple: they’re going to set up an independent credit information-sharing bureau. This means that they can share users’ credit information, like outstanding balances and payments.

Through this bureau, they can check on customers’ creditworthiness to determine a person’s eligibility for BNPL services.

Additionally, BNPL providers will go through an audit and accreditation process by an independent assessor every three years. This will be done by the consumer credit reporting company Experian.

If they pass, they will be able to display a trust mark, which tells customers that the BNPL provider complies with the code of conduct.

All of these are expected to be completed by late 2023.

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