Clear up the confusion surrounding the new "buy now, pay later" financing formulas

Clear up the confusion surrounding the new "buy now, pay later" financing formulas


Montréal, October 5, 2023 - Governments must intervene to regulate the new "buy now, pay later" financing formulas in order to better protect consumers, reveals a study released today by Option consommateurs.

These companies include Sezzle, Afterpay, Klarna and Affirm, which enable consumers to finance small purchases (make-up products, clothing) over a short period (2, 3 or 4 instalments).

Formerly used for high-value purchases, these companies are changing the game, presenting themselves either as a simple payment method with no fees or interest, or as a credit product with the option of registering on a credit file.

"There is a lack of clarity in the application of the law for these companies, particularly in the application of their contract as a credit agreement, due to the diversity of practices regarding fees and the holding of lender's licenses. The legal provisions on credit to protect consumers from excessive debt were not all respected", denounces Me Clarisse N'Kaa, lawyer at Option consommateurs and author of the research.

These companies have a number of practices that are likely to hit the most vulnerable consumers hard, such as direct and unlimited access to bank accounts for collection purposes, the imposition of insufficient funds fees by some companies in addition to those charged by banks, loan stacking and credit file registration, also for some of them.

In addition, the report notes that there is some confusion among consumers as to whether or not credit is involved, as well as confusion as to the existence of fees or a credit check prior to obtaining financing. This confusion stems from the representations made by companies, which may be deemed misleading in certain cases.

"The lack of clarity in the application of current regulations to emerging businesses is likely to weaken consumer protection in relation to credit and limit access to certain remedies", sums up Me N'Kaa.

Buy Now, Pay Later: Risk and Remedy Reviews" was conducted with funding from the Contribution Program for Non-profit Consumer and Voluntary Organizations of Innovation, Science and Economic Development Canada.


About Option consommateurs

Option consommateurs is a non-profit association whose mission is to defend the rights and interests of consumers. It focuses on issues related to personal finance, business practices, financial services, privacy, energy, debt and access to justice.


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Marie-Ève Dumont, Director of Communications


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