SINGAPORE - A new code of conduct for buy now, pay later (BNPL) providers will come into effect on Nov 1.

It sets out standards developed by a working group made up of industry players that will guide BNPL services here and ensure that users do not take on too much debt.

The working group was formed in March by the Singapore FinTech Association and comprised eight industry players, including Atome, Grab Financial Group and ShopBack, under the guidance of the Monetary Authority of Singapore.

Here are the five guidelines in the code of conduct released on Thursday.

1. Credit-worthiness safeguards ensure BNPL customers do not overleverage themselves

The safeguards mean BNPL providers can offer their services only to customers who are at least 18 years old. 

Each BNPL provider will permit customers to accumulate no more than $2,000 in outstanding payments at any one time.

Only those who have fulfilled additional credit assessment criteria can accumulate more than $2,000 in outstanding payments.

Additional criteria include the customer’s income and overall credit situation.

Consumer credit reporting company Experian will collate customers’ outstanding BNPL balances and missed payments data shared by all BNPL firms.

Customers who fail to meet their payment obligations will not be able to use their BNPL account to make additional purchases.

2. Fair, transparent fees, and clear disclosures

BNPL providers have committed to make their fees and charges clear and transparent to customers.

They will notify customers at least two weeks in advance before introducing new fees or increasing existing fees.

BNPL providers will also ensure fees and charges are fair – All fees, including late fees and other levies, will be capped at a maximum level.

They will not charge late fees more than once per delayed instalment.

Customers can also repay their purchases in full at any time without incurring early repayment fees.

To ensure customers can keep track of their payment obligations, BNPL providers will give them access to their account statements, which will consolidate the total outstanding balance of purchases made with each BNPL firm.

3. Ethical marketing practices

BNPL providers will ensure that advertisements of products and services comply with the Consumer Protection (Fair Trading) Act, as well as with advertising codes set out by the Advertising Standards Authority of Singapore.

They must also make sure their advertising and promotional materials are clear and not misleading or deceptive.

Where in-person marketing channels are used, BNPL providers will avoid soliciting customers aggressively.

4. Accommodation for voluntary exceptions

BNPL providers will allow consumers to voluntarily exclude themselves from BNPL services and promotional materials once this has been communicated in writing. 

Providers will also retain a list of customers who have voluntarily excluded themselves from their services.

5. Financial hardship assistance

BNPL providers will consider extending financial hardship assistance to customers facing financial difficulties.

Help can come in the form of a waiver or a deferral of fees and charges.

BNPL firms will also work out a mutually acceptable payment arrangement with customers and will commit not to initiate bankruptcy proceedings against them.

The eight participants in the BNPL working group – Atome, Grab, ShopBack, Ablr, Latitude Pay, Pace, Split and SeaMoney – will now be required to undergo an audit and accreditation process by a panel of independent expert assessors, who could come from the Big Four accounting firms and local players in the fintech ecosystem.

If they are assessed to be compliant with the BNPL Code of Conduct, they will be awarded a trustmark, which gives customers the trust that they are dealing with ethical BNPL providers.

Accredited BNPL providers will have to undergo re-accreditation by the independent expert assessor every three years. 

The audit and accreditation process is expected to be completed in late 2023.

Correction note: SFA said local players in the fintech ecosystem is different from local fintech players. The story has been updated for clarity.