We are thrilled to share a comprehensive analysis of the recent EU Directive 2023/2225 on consumer credit contracts (CCD II) and, specifically, on the increasingly prevalent phenomenon of “Buy Now Pay Later” (BNPL). This article offers an expert perspective on how the new regulations are shaping the landscape of consumer credit.
1. Growth of BNPL in the Digital Context
In this in-depth analysis, we can examine the growth of digitization in the financial sector, accelerated by the Covid-19 pandemic, and how this has contributed to the expansion of BNPL. The traditional model involves short-term financing to defer payments without interest, primarily based on fees paid by sellers to financiers.
2. Bank of Italy’s Approach to BNPL
We can analyze the two main BNPL models recently outlined by the Bank of Italy in the Italian market. One involves a bank or financial intermediary granting deferred payments directly to the consumer, while the other implies a payment deferral granted by the seller to the consumer, followed by the assignment of the credit to a third-party financier. Partner Romanelli highlights the challenges and protections associated with each model.
3. BNPL as a New Category of Consumer Credit
We can explore the growing popularity of BNPL, attracting the attention of European institutions and leading to the promulgation of Directive CCD II. The new regulations, analyzed in detail, have expanded the scope of consumer credit contract regulations, including the inclusion of BNPL under certain conditions. Free payment deferrals to consumers, accompanied by the offer or purchase of credits by third-party financiers, are now subject to specific rules.
4. Implications for Industry Operators
We can highlight how the new regulations require industry operators to comply with transparency rules established by Directive CCD II. This includes adapting advertising practices and assessing the creditworthiness of applicants. This radical change could significantly influence the customer experience on BNPL platforms.
5. Future Perspectives and Challenges to Address
The analysis includes a focus on the supervision of BNPL platforms. It examines the obligation for operators to undergo an accreditation and supervision procedure, but the precise regulatory framework and uniformity across jurisdictions remain uncertain. The author’s analysis of the proposal for a third Directive on payment services adds further considerations about the role of financial intermediaries.
6. Conclusions and Next Steps
In conclusion, we can see how this redefines the landscape of consumer credit, bringing BNPL under strict regulation. Industry operators are now called upon to navigate this new scenario, adapting their practices to ensure compliance and consumer protection.
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