In 2017, the first “Buy Now, Pay Later” (BNPL) company – Rely – entered the Singapore market. Ever since then, more BNPL plays have entered the market, including Atome and Grab.
While marketed to make payments more seamless and convenient, BNPL has also attracted criticism for targeting vulnerable consumers who overspend and fall into debt. This was also raised in parliament on how the government can protect young or compulsive buyers from taking on too much debt.
To address this, a BNPL working group was formed under the guidance of the Monetary Authority of Singapore (MAS), including the Singapore FinTech Association (SFA) and industry players such as Grab Financial Group, Atome and ShopBack.
On the 20th of October 2022, the group launched a BNPL Code of Conduct that sets out guidance for any firm intending to use a BNPL-like model. This aims to protect consumers from over-indebtedness and allow existing and future BNPL offerings to benefit the ecosystems.
Here’s what consumers needs to know about BNPL Code of Conduct.
#1 BNPL Companies Must Impose Credit Safeguards
Just like traditional credit card companies, BNPL companies will have to impose additional safeguards to protect consumers from over-indebtedness.
Firstly, BNPL services can only be offered to consumers aged 18 and over and the default credit limit will be limited to no more than $2,000 in outstanding payments if the consumer doesn’t undergo further credit assessment.
This $2,000 credit limit will apply on all outstanding payments at any given time with each of the BNPL companies adhering to the Code of Conduct. To facilitate this, data from consumers such as income and credit information will be shared among all BNPL platforms. BNPL firms will suspend their services to a consumer if said consumer failed to meet payment obligations.
BNPL firms will also collect additional personal information such as CPF contribution, payslips or any information that is a good proxy of your income. These data will be vetted before granting an increase in limit in excess of $2,000.
Having a credit safeguard will create an additional barrier to protect financially unsavvy consumers, especially the younger audience from overspending and incurring unnecessary debt.
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#2 Fair, Transparent Fees, And Clear Disclosures
Attractive deals and promotions tend to attract unwary consumers to overspend. To counter this, the BNPL Code of Conduct emphasises transparency and clear disclosures. BNPL companies will cap all types of fees, including late fees and other charges. These fees and any interests added on will not be compounded and additional payment will be communicated clearly and transparently to all users of the service. There will also be no early repayment fees if the consumer decides to repay earlier.
Consumers will have access to account statements that reflect the total outstanding balance of purchases for each BNPL provider, which will make budgeting a much easier task to undertake.
BNPL firms will also notify you at least 2 weeks before introducing changes and all of their product information will be clearly stated on their website. On top of that, all fees that will be charged if you use their services will be shown, including how they will be charged and the maximum amount charged.
BNPL firms will also suspend consumers limit if said consumers fail to meet their outstanding payment obligations. With that, BNPL firms will deem consumers who do not pay on time and decide that BNPL services are not suitable for those consumers.
Having fair, transparent fees and clear disclosures gives the consumer a better overview of their spending habits, reduces the probability of overspending due to hidden fees and creates an environment to practise proper spending habits.
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#3 Ethical Marketing Practices
According to the Singapore Code of Advertising Practise (SCAP), it is stated that all advertisements must be legal, decent, honest, and truthful.
Following those principles, BNPL providers will ensure that all future marketing advertisements and offers will be made clear to all consumers. This will eliminate deceptive and misleading content to entice the everyday consumer into using a BNPL service to purchase a product or service.
Additionally, BNPL companies will take reasonable and appropriate steps to avoid providing their services for high-risk or illegal activities such as sale of narcotics, online gambling, retail gambling, gambling at domestic or offshore casinos, and the purchase of firearms.
#4 Accommodation For Voluntary Exceptions
Just like how the National Council on Problem Gambling (NCPG) allows family members or individuals to self-exclude from gambling, BNPLs is now allowing individuals to voluntarily self-exclude themselves from their services and promotional services. A list of self-excluded individuals will be kept, preventing future purchases or advertisements to entice back into the cycle of overbuying.
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#5 Financial Hardship Assistance
Being in a poor financial situation can set you back in attaining financial freedom as well as additional stress on your family unit. It is always wise to plan and create a safety fund for instant liquidity in case of emergency use.
BNPLs will adopt an empathetic stance towards consumers and offer hardship assistance to consumers. The BNPL firms will work on a mutually acceptable agreement to support consumers in need of it and will halt any further transactions. Consumers will just need to inform BNPL firms in writing and they will proceed with the procedure for financial hardship assistance, which may include negotiating a new payment arrangement.
BNPL providers will not act aggressively to launch bankruptcy proceedings, any other legal recourse against their customers and late fees will not be compounded.
If you require financial support, the Singapore Government have financial assistance schemes to support aid and your family in times of need.
These New Codes Will Be Adopted Fully By The BNPL Industry By Late 2023
All BNPL providers will need to be audited to determine if they have adopted the new codes. If successful, an accredited Trustmark will be given by a newly created credit information-sharing bureau, to show consumers that they are compliant with the new code.
MAS will continue to track the developments and support consumers if any risk arises in the BNPL sector. These new codes will help reinforce the integrity of the BNPL model as well as assist consumers in making better decisions whilst spending. However, consumers will still need to be financially aware of their spending habits and take charge of their own financial planning.
The post 5 Things To Know About The New Conduct For The Buy Now, Pay Later (BNPL) Model appeared first on DollarsAndSense.sg.
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