A. Introduction

A code of conduct outlining best practices for “buy now, pay later” (BNPL) providers (the BNPL Code) was introduced on 20 October 2022 following seven (7) months of discussions among industry players, and will take effect on 1 November 2022.

Since 2020, BNPL transactions in Singapore have more than tripled, with the latest figures valuing BNPL transactions in Singapore at S$440 million. In response, a working group (consisting of BNPL providers such as Atome, Grab Financial Group and ShopBack) was formed by the Singapore FinTech Association, under the guidance of the Monetary Authority of Singapore (MAS), to develop the new and industry-led BNPL Code to promote best practices with respect to BNPL offerings.

B. Need for consumer protection in the BNPL industry

Under BNPL financing, consumers typically make an upfront payment towards the purchase, then pay the remainder off in a predetermined number of instalments. BNPL financing is convenient for consumers as BNPL plans generally do not charge interest, and are easier to get approved for, as compared to traditional credit cards. Further, BNPL does not affect the consumer’s credit score.

Notwithstanding the attractiveness of BNPL financing, consumers must keep themselves informed of its pitfalls. BNPL payments may not be easily trackable and may continue even if the purchased item is returned due to the need for the merchant to inform the BNPL provider of the refund. Missing or late payments may result in late fees which may be substantial.

To mitigate the risk of debt accumulation and protect the interests of users, the BNPL Code is slated to be introduced this year to regulate the BNPL industry.

C. The BNPL Code

The BNPL Code aims to put in place certain standards and best practices (the Best Practices) including:

• credit worthiness safeguards;
• fair and transparent fees, and clear disclosures;
• ethical marketing practices;
• accommodation for voluntary exceptions; and
• financial hardship assistance.

To encourage the adoption of, and ensure compliance with, the BNPL Code, BNPL providers will be required to undergo an audit and accreditation process. Under the process, they will be given the opportunity to display an accredited trustmark to demonstrate their compliance with the BNPL Code to their customers. The accredited trustmark would indicate compliance with the BNPL Code for three (3) years where BNPL providers would have to be re-accredited again thereafter. The process of accreditation and awarding the trustmark is expected to be completed in late 2023.

An independent oversight committee will also be formed to enforce the BNPL Code. It will have the power to request for written submissions from a BNPL provider with respect to suspected violations and remove an accredited BNPL provider from the BNPL registry.

D. Best Practices under the BNPL Code

The Best Practices that will adopted by BNPL providers under the BNPL Code are set out below:

1. Creditworthiness safeguards

Each BNPL provider will permit customers to accumulate no more than S$2,000 in outstanding payments at any given time, unless they complete an additional credit assessment. This assessment must consider inter alia:

1. customer income information; and
2. customer credit information shared across all BNPL firms.

BNPL providers will also suspend a customer’s access and use of its BNPL services, upon his/her failure to meet any of his/her payment obligations.

2. Fair, transparent fees, and clear disclosures

BNPL providers will cap all fees, including late fees and other charges. Fees and interests, if any, will not be compounded. All fees and fee-related structures will also be communicated in a manner that is clear and transparent to customers.

Customers are entitled to make full repayment with BNPL providers at any given time, without any early repayment fees. Each BNPL provider will ensure that customers have access to account statements, which consolidate the total outstanding balance of purchases made through its services.

While BNPL providers will offer their terms and conditions primarily in English, they will also provide explanations in Chinese, Malay and Tamil at the request of the customers. At least two (2) weeks’ notice will be given before new fees are introduced, existing fees are increased, or other material changes are made to their terms and conditions.

3. Ethical marketing practices

BNPL providers will ensure that advertisements of their products and services comply with the Consumer Protection (Fair Trading) Act 2003 and the industry-regulated advertising codes set out by the Advertising Standards Authority of Singapore. Their advertising and promotional materials will be clear and will not be misleading and/or deceptive, including not omitting or hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.

4. Accommodation for voluntary exceptions

BNPL providers will allow customers to voluntarily exclude themselves from BNPL services and promotion materials once this has been communicated by the customers in writing. BNPL providers will retain a list of the customers who have voluntarily excluded themselves from the services of the BNPL providers.

5. Financial hardship assistance

BNPL providers will consider extending assistance to customers facing financial hardships to work out a mutually acceptable payment arrangement with such customers. In the meantime, BNPL providers will bar any further transactions.

BNPL providers will further commit to abstaining from initiating bankruptcy proceedings against their customers. However, they will not provide their services for high-risk or illegal activities such as sale of narcotics, gambling and/or firearms.

6. Dispute resolution process

BNPL providers will handle complaints promptly and aim to provide a fair resolution to all parties. All complaints received through their designated channels will be acknowledged within three (3) working days, with an initial response provided within 14 working days from the date of the complaint.

E. Concluding remarks

Existing BNPL providers are given 12 months to come into full compliance with the BNPL Code. The MAS has said that it will continue to monitor developments in the BNPL sector and work with the industry to address any risks to consumers; it therefore behoves businesses operating BNPL platforms to keep themselves informed of the upcoming developments in the regulations governing BNPL transactions and consider how their operational practices should be updated.