The global boom of buy-now-pay-later (“BNPL”) does not seem to be slowing since its widespread take-up by consumers across the world during the pandemic. With consumer attitudes and spending habits evolving, BNPL is being used increasingly on everyday items such as clothing and groceries, rather than the more traditional larger ticket items seen in the past. With this prevalence in day-to-day life, legislators around the world are now beginning to take a closer look at the sector, particularly in light of the insolvency risk it can represent for the most financially vulnerable people.
Looking at France in particular, BNPL schemes are excluded from the consumer credits regime when specific conditions are met. However, French banking rules still apply and BNPL is indeed considered a credit, therefore entering into the scope of the French banking monopoly rules.
So, what does that mean? What are the next steps forward in this regulatory landscape? Whilst the current consumer credits regulatory framework stems from the EU Directive 2008/48/EC of 23 April 2008 on credit agreements for consumers, on June 9, 2022 the Council agreed to revise the consumer credit directive to modernize and enhance protection at European level for consumers taking out such credit. The European Commission proposal significantly broadens the scope of products that will need to comply with stricter credit rules, including BNLP products.
It has been proposed that pre-contractual information forms will have to be merged to allow consumers to compare credit offers more efficiently, key information to be presented on the first page – giving consumers these details upfront and improving readability and ease of understanding. Other changes aim to improve legal certainty, including clarifications on the creditworthiness assessment, the definition of a maximum time limit to exercise the right of withdrawal, clarifications on the admission procedures, and penalties, etc.
At present, these are just proposals and there is no entry into force date yet for this proposal.
For a deeper dive into the regulatory landscape, as well as to see how other jurisdictions compare, take a look at our webinar “The BNPL global landscape and latest trends” where we were joined by Sebastiaan Bierens of Capstone DC, a global policy-driven strategy firm advising investors in the global BNPL sector.