New ‘buy now, pay later’ code of conduct: Customers cannot have over $2k in outstanding payments

BNPL allows consumers to defer payment on goods or services without having to pay interest. PHOTO: ST FILE

SINGAPORE - A code of conduct outlining best practices for “buy now, pay later” (BNPL) providers was introduced on Thursday following seven months of discussions among industry players, and will take effect on Nov 1.

The code was developed by the Singapore FinTech Association (SFA) and eight industry players including Atome, Grab Financial Group and Shopback, with Monetary Authority of Singapore (MAS) guidance.

It was initiated following concerns that the emerging payment option was luring people into debt, given that BNPL allows consumers to defer payment on goods or services without having to pay interest. They either repay the purchase price in one lump sum or in three to four equal instalments, usually over two to three months.

Because consumers are able to borrow for “free” for short periods and because their purchases are split up into manageable repayments, there have been concerns that people will overspend and end up deep in debt.

Ms Loo Siew Yee, MAS’ assistant managing director for policy, payments and financial crime, said it sets out important industry-agreed standards and safeguards to mitigate the risk of debt accumulation and protect the interests of BNPL users.

The code stipulates that each BNPL provider will not allow customers to accumulate more than $2,000 in outstanding payments until an additional credit assessment is done. They will also suspend a customer’s access to their services if payment obligations are not met.

BNPL providers will cap fees at a maximum level and communicate all such charges clearly to users, and not penalise customers who want to repay purchases in full early.

If a customer is facing financial difficulties, BNPL providers will consider waiving or deferring fees and charges. They will also work out a mutually acceptable payment arrangement with customers and not initiate bankruptcy proceedings.

BNPL providers will have to ensure their advertising and promotional materials are not misleading or deceptive, and they cannot solicit customers aggressively. They also cannot market their services to customers who have asked to be excluded from such promotions.

BNPL providers will have to undergo an audit and accreditation process by a panel of independent expert assessors every three years.

The independent assessors could come from the Big Four accounting firms – Deloitte, PricewaterhouseCoopers, KPMG and Ernst & Young – and local firms in the fintech ecosystem who are able to provide such services.

For now, the eight participants in the BNPL Working Group – Atome, Grab, Shopback, Ablr, LatitudePay, Pace, Split and SeaMoney – have signed off on the code. Once they are accredited, they will be able to display the trustmark that shows consumers they are compliant with the code.

Atome was one of the industry players involved in the development of the BNPL code of conduct. PHOTO: ATOME

The industry will also work with an independent credit information sharing bureau, which it has identified as Experian.

All eight accredited BNPL players will share users’ credit information – such as outstanding BNPL balances, missed payments, delinquencies and other personal information – to facilitate creditworthiness checks by Experian.

The information will be strictly for use in providing BNPL services and will not be shared with other financial institutions or non-accredited BNPL players.

The process of accreditation and awarding the trustmark is expected to be completed in late 2023.

SFA president Shadab Taiyabi said the code will foster greater trust and transparency between BNPL providers and the customers they serve.

Mr Wong Wenbin, head of Grab Financial Group Singapore, said the code puts in place clear guidelines for consumer protection and sets out a framework that enables BNPL service providers to continally innovate. Grab PayLater is Grab Financial’s BNPL offering.

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