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$2,000 debt limit for buy now, pay later users and credit information sharing under new code of conduct

Jovi Ho
Jovi Ho10/20/2022 06:02 PM GMT+08  • 4 min read
$2,000 debt limit for buy now, pay later users and credit information sharing under new code of conduct
Under a new code, buy now, pay later providers pledge to cap all fees, including late fees and other charges.
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The Singapore FinTech Association (SFA), along with industry players Atome, Grab Financial Group and ShopBack, unveiled the Buy Now, Pay Later (BNPL) Code of Conduct on Oct 20.

Under the code, each BNPL provider will allow customers to accumulate no more than $2,000 in outstanding payments at any given time.

Should users wish to increase this limit, BNPL providers will complete an additional credit assessment. This will involve collecting users’ address, nationality and even CPF contribution information or income tax filings.

BNPL providers will also consider users’ creditworthiness as determined through credit information sharing processes before granting any increase in the BNPL limit.

Under the code, BNPL providers say they will suspend a consumer’s access and use of its BNPL services should they fail to meet any payment obligations.

According to the code, new customers on BNPL platforms will face the $2,000 limit. Existing customers who were onboarded prior to Nov 1 may continue with their prior BNPL limit until providers implement the measures above, or Nov 1, 2023, whichever earlier.

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Designed under the guidance of the Monetary Authority of Singapore (MAS), the BNPL Code sets out guidance for BNPL service providers in Singapore to protect consumers and ensure that BNPL offerings will continue to benefit the ecosystem, says the group.

For credit risk assessment, BNPL providers will share users’ outstanding balances, missed payments, delinquencies and other personal information with an independent service provider. This information will also be made available to other BNPL providers who comply with the BNPL Code.

BNPL providers will also cap all fees, including late fees and other charges. Fees and interest, if any, will not be compounded. BNPL providers pledge to communicate these in a “clear and transparent” manner to customers.

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Each BNPL provider will determine their own fee charges and capping practice. “[We] will ensure that the cap strikes a reasonable balance between commercial viability and not unduly increasing [users’] indebtedness.”

Consumers are also entitled to make full repayment with BNPL providers at any time, without early repayment fees. BNPL providers will each ensure that consumers have access to account statements consolidating the total outstanding balance of purchases made through the respective BNPL provider.

BNPL providers will consider extending hardship assistance to consumers facing financial hardships to work out a “mutually acceptable payment arrangement” with them. During this time, BNPL providers will not allow any further transactions. While BNPL providers may appoint a payment collector to recover owed sums, they commit not to initiate bankruptcy proceedings against their customers.

BNPL providers also pledge not to engage in “misleading or deceptive” advertising. In addition, consumers may opt out from BNPL services and promotional materials by writing to providers. Providers will retain a list of the customers who have voluntarily excluded themselves from their services.

BNPL ‘trustmark’

In addition to Atome, Grab and ShopBack, the other BNPL Working Group participants are: Ablr, Latitude Pay, Pace, Split and SeaMoney.

BNPL providers who agree to follow the guidelines will be required to undergo an audit and accreditation process which will allow them to display an accredited “trustmark” showing customers that they are compliant with the BNPL Code.

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Accredited BNPL providers will be required to undergo a re-accreditation process every three years.

The BNPL Working Group says the next phase of rollout includes setting up the credit information sharing bureau, completing the accreditation process and awarding the trustmark to accredited BNPL providers. It expects to complete these in late-2023.

The SFA recommends that customers only deal with accredited BNPL providers. “You can be assured of fees transparency, a financial hardship assistance plan, and an avenue to escalate complaints from errant BNPL providers who have been accredited.”

Customers who wish to lodge complaints over a BNPL provider’s suspected infringement of the code may write to the SFA via email.

Loo Siew Yee, assistant managing director (policy, payments and financial crime) at MAS, says: “The BNPL Code sets out important industry-agreed standards and safeguards to mitigate the risk of debt accumulation and protect the interests of users… We will continue to monitor developments in the BNPL sector and work with the industry to address any risks to consumers.”

Shadab Taiyabi, president of the SFA, says: “The launch of the BNPL Code represents a significant step forward within the industry to ensure that the consumers’ interests are prioritised. Given the growth potential of the BNPL industry in Singapore, we are confident that the BNPL Code will be able to set the standards for existing and future providers in Singapore, fostering greater trust and transparency between these providers and the consumers they serve.”

The SFA is a cross-industry non-profit organisation with over 800 members from early-stage innovative companies to large financial players and service providers.

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