Case calls for stronger safeguards for BNPL consumers including recourse avenues, advertisement regulation
Uma Devi
THE Consumers Association of Singapore (Case) is calling for stronger consumer safeguards for buy now, pay later (BNPL) schemes, in the hopes that these moves will ultimately help consumers “enjoy a seamless and smooth BNPL experience”.
In an article posted on the consumer watchdog’s website on Friday (Jun 24), Case president Melvin Yong noted that the association received 18 consumer complaints involving BNPL service providers from Jan 1, 2021 to Jun 23 this year. These complaints included technical issues with payments, as well as the inability of consumers to seek refunds.
Although Yong acknowledged that such disputes are “unfortunately inevitable”, he said that relevant parties in Singapore need to do more to shape the “nascent” BNPL scene.
He proposed that recourse avenues be made clear to consumers before an agreement takes place. This includes making known to the consumer whether the dispute will be resolved by the service providers or the merchants.
Yong also made a number of other suggestions. He called for limits to be set on both consumers and BNPL providers. Consumers should be allowed to set purchase limits for themselves to guard against excessive and untenable monthly instalments.
There should also be a corresponding limit on the maximum quantum of penalty charges that BNPL providers can levy on consumers in order to prevent defaults, he said.
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“My worry is that BNPL services may lead to consumers spending beyond their means and make it easy to impulse spend, due to a false perception of increased purchasing power,” said Yong.
“This happens in the credit card landscape, and can just as easily happen with the proliferation of BNPL services.”
Advertisements in the space should also be regulated, said Yong. Advertisements for BNPL services should prominently display the total absolute amount that consumers would pay should they default on their instalments.
He explained that consumers may not be aware of non-payment terms such as late fees and accruement of unpayable debt when deciding to use a BNPL service.
Such mandatory disclosures will give consumers the full picture of the risks involved in using the service, thereby preventing reckless spending.
He also suggested having a purchase limit for accounts opened by first-time BNPL users and vulnerable accounts, such as people with poor credit ratings and are deemed to be on shaky financial grounds.
“One of the main criticisms of the Singaporean BNPL scene is that credit is “too accessible”, due to the lack of an assessment of the credit worthiness of its users,” he said.
These limits can progressively be increased if the consumer in question is shown to have good credit standing by making timely repayments.
He also proposed a mandatory ceiling on maximum purchases allowed for users aged below 21, as the vast majority of younger consumers between the ages of 18 and 21 do not earn an income.
Yong also raised the possibility of having an integrated BNPL repository that includes both BNPL credit information and credit information from other financial institutions.
Consumers should be made aware of this repository, and can then opt to have a holistic view of their credit standing including their BNPL credit status.
However, Yong noted that short-term financing services such as BNPL schemes are attractive due to convenience of access and the lack of interest charges. BNPL services have also boomed in popularity, and are now projected to see a 40 per cent compounded annual growth in Singapore through 2025.
He commended the joint effort by the Monetary Authority of Singapore and the Singapore FinTech Association in coming up with a code of conduct for BNPL transactions.
“With proper planning, BNPL will be a value-added service to consumers,” he said.
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