Consumer Centre Issues Alert on 'Buy Now, Pay Later' Payment Methods - Payment Plans with Delayed Billing: Consumer Authority Issues Alert
News Article: VZBV Raises Concerns Over "Buy Now, Pay Later" Loans and Calls for Stronger Consumer Protections
The Consumer Advocacy Group (VZBV) has expressed concerns about the pitfalls of "Buy Now, Pay Later" (BNPL) loans, highlighting the risks and the need for stronger consumer protections in this area. The group's concerns centre around the risk of excessive debt accumulation, transparency deficiencies, and the lack of adequate consumer rights.
BNPL loans, which are frequently offered for online purchases, have been criticised for their ease and opacity, potentially leading to consumers taking on more debt than they can handle. VZBV argues that the lack of transparency about terms and conditions could result in consumers being unaware of the financial consequences. Furthermore, the group emphasises the need for consumers to have clear cancellation rights and protection from penalties, similar to traditional loans.
In response to these concerns, the Federal Ministry of Justice has drafted a bill aimed at incorporating BNPL models into existing consumer credit protections governed by the EU Consumer Credit Directive. The draft bill, located in Berlin, extends regulatory safeguards traditionally applied to credit agreements to BNPL loans for the first time. It also enhances consumer rights such as clearer disclosure of loan conditions and potentially imposes stricter creditworthiness checks.
However, VZBV has raised several issues with the draft bill. The group criticises a lack of transparency regarding rejected credit wishes and some formulations as being too vague. Additionally, the draft bill does not seem to include specific requirements for a thorough examination of repayment ability when granting BNPL and overdraft loans.
The VZBV has also highlighted a case involving an 18-year-old who accumulated debts of 3,107.74 euros within three months by using the delayed payment option 39 times. The group warns that consumers could easily fall into a debt trap with these loans and calls for a signature to still be required for online consumer loans to prevent impulsive credit decisions.
In summary, VZBV's concerns revolve around the risk of consumer over-indebtedness, transparency deficiencies, and the lack of adequate consumer rights with BNPL loans. The group welcomes the legislative initiative but stresses the importance of the bill effectively closing loopholes to prevent BNPL loans from becoming a new source of consumer financial harm. The draft bill now needs the approval of the Bundestag.
References: [1] VZBV Press Release, "VZBV warns of potential pitfalls with 'Buy now, pay later' loans", link [3] VZBV Press Release, "VZBV criticises lack of transparency in draft bill for the implementation of the EU Consumer Credit Directive", link [5] Federal Ministry of Justice, "Draft bill for the implementation of the EU Consumer Credit Directive", link
EC countries could benefit from implementing stricter regulations on "Buy Now, Pay Later" loans, as highlighted by VZBV, to ensure consumer protection and prevent excessive personal-finance debt accumulation. These stricter regulations could include clear disclosure of terms and conditions, mandatory signatures for online loans, and stricter creditworthiness checks to avoid over-indebtedness in businesses offering vocational training within these countries.
