Buy Now, Pay Later services under the current Consumer Credit Directive (2008/48/EC)
BNPL services can be categorized into two variants. In the first variant, the seller of a product offers a time period within which the consumer must pay for the purchased product. Usually, this period is 14 or 30 days. In the second variant, the seller of a product transfers the claim against the consumer for payment of the purchase price to a third party. This third party then collects the claim against the consumer to pay the purchase price for its own account and risk in up to three different installments. The provision of such BNPL services is currently outside the scope of the existing Consumer Credit Directive. We also refer to our earlier news release of 31 May 2022, in which this was explained.
Revised Consumer Credit Directive (2023/2225/EU)
On 18 October 2023, the revised Consumer Credit Directive was adopted. Offering BNPL services falls within the scope of the revised Consumer Credit Directive under certain circumstances. The following BNPL services however, are excluded from the scope of the revised directive: (a) deferral of payment of up to fifty (50) days by suppliers of goods or services, without interest or other charges and with only limited charges in case of late payment, and (b) deferral of payment of up to fourteen (14) days without interest or other charges and with only limited charges in case of late payment by suppliers of goods or services who do not qualify as micro, small or medium-sized enterprises.
The third party who offers deferred payment terms falls within the scope of the revised Consumer Credit Directive. Once the revised Consumer Credit Directive comes into force, such third parties will be subject to license requirements and certain regulations regarding responsible lending. The national legislator however has been given a mandate to not apply certain obligations to third parties offering BNPL services.
Member States have until 20 November 2025 to implement the provisions of the revised Consumer Credit Directive into national law. After this deadline has passed, Member States will have another year to actually start applying the provisions of the Consumer Credit Directive to BNPL services. As a result, providers of BNPL services must comply with the new rules on 20 November 2026.
On the BNPL Code of Conduct
In the run-up to the entry into force of the revised Consumer Credit Directive, several BNPL providers in the Netherlands decided to subject their services to provisions of the Buy Now, Pay Later (BNPL)-Code of Conduct. This is reflected in provisions on amongst others the prevention of so-called ''debt piling'', the provision of information prior to the conclusion of a credit agreement with a consumer and the requirement to send at least one payment reminder free of charge if payment is not timely made. Read more about the BNPL Code of Conduct.
Certain highlighted provisions are:
- Article 6 – The provider has a policy to ensure it does not provide BNPL services to consumers under the age of 18;
- Article 7 – The provider shall not provide BNPL services if it has reason to believe that it would be irresponsible in light of the financial capacity of the consumer in question;
- Article 9 – The provider's policy is to prevent debt accumulation. This means that it is the provider's policy not to provide new BNPL services to consumers who are in payment arrears with that provider;
- Article 12 – After sending a notice of default, the BNPL provider may charge collection fees. These costs are capped in accordance with the Dutch Collection Costs Act (Wet Incassokosten); and
- Article 17 – Leading up to implementation of the Directive, providers are examining, among other things, the extent to which a registration system with the BKR is possible, specifically for BNPL services.
While the implementation of the revised Consumer Credit Directive into national legislation is pending, the AFM endorses the importance of the code of conduct and supports the call for other BNPL providers to join the code of conduct. Read more about the AFM's news release.
Although the consensus currently is that BNPL services are not covered by the Consumer Credit Directive, the Dutch Supreme Court nevertheless posed preliminary questions to the Court of Justice of the European Union in May of this year. These preliminary questions relate to the interest and fees charged to consumers by providers of BNPL services. Specifically, the Supreme Court asked the Court of Justice of the European Union whether such interest and costs should only include the interest and costs a consumer must pay if he repays the credit on time, or whether it should also include the interest and costs the consumer owes if he would be in payment arrears.
According to a letter to the House of Representatives from the Dutch Minister for Legal Protection (Minister voor Rechtsbescherming), the Dutch government has submitted an opinion to the Court of Justice of the European Union in the abovementioned proceedings. From this opinion, we understand that the Dutch government is of the opinion that providers of BNPL services that charge collection fees in case the consumer exceeds the payment term, in principle do not fall within the scope of the Consumer Credit Directive, unless the collection fees are part of the BNPL providers' business model and can therefore lead to profitability. If that is the case, providers of such BNPL services should not be exempted from the scope of the Directive.
Do you have questions about BNPL services or other financial regulatory topics? Please contact our Financial Regulatory Team.