Governments Around the World Exploring BNPL Regulation

Governments around the world have started considering regulations to apply many existing credit laws to the buy now, pay later (BNPL) market. Since the BNPL market began, it has been mostly free from government oversight like many other tech products, but pending regulation in the U.S. and the European Union (EU) could impact BNPL providers.

According to PYMNTS, BNPL makes up 3.8 percent of North American eCommerce sales, and 9 percent of European eCommerce sales. In the U.S., BNPL regulation is being led by the Consumer Financial Protection Bureau (CFPB), which recently released a report highlighting risks of BNPL to consumers, including debt accumulation and overextension, as well as data harvesting by providers.

Experts have predicted that the CFPB will likely release proposed rules that will place BNPL providers under the same standards as traditional credit companies, and will limit the amount of data that providers can use from their customers.

BNPL regulation is further along in the EU; in 2021, the European Commission approved a revision to the Consumer Credit Directive, extending it to BNPL. The revision included new protections aimed at a mobile-first market, like banning pre-checked contract agreement boxes and requiring contracts to be presented in an easily comprehensible way.

Additionally, the U.K. will soon be able to ban BNPL lenders from operating if they fall under the jurisdiction of the Financial Conduct Authority. To avoid fines or imprisonment, BNPL providers will have to ensure that the information provided to potential customers is up to code, as well as their affordability checks.

Some BNPL lenders are already being punished for breaking regulatory rules. In Sweden, Klarna was fined 7.5 million krona—roughly $723,000—for violating GDPR’s personal data protection clause.