Buy Now, Pay Later: The End of the Regulatory Grey Area?
By Pierre E. Berger, Joris Latui and Selena Rosiglioni, DLA Piper
Buy Now, Pay Later solutions ("BNPL Solutions") are one of the fastest-growing payment methods in Europe. BNPL Solutions finance a consumer for the exclusive purpose of purchasing goods or services provided by a supplier. BNPL Solutions are often granted free of interest and without any other charges.1 Scaling FinTech companies, such as Klarna, play a key role in popularising BNPL Solutions amongst European consumers.
The rapid growth of BNPL Solutions has not gone unnoticed by European legislators. As part of the reform of the European consumer credit framework, the European Union concluded that certain BNPL Solutions were operating outside of the regulatory perimeter despite the over-indebtedness risks to which they give rise. Directive (EU) 2023/2225 of 18 October 2023 on credit agreements for consumers ("CCD II"), replacing the current 2008 Consumer Credit Directive2, addresses this concern by enhancing the regulatory framework applicable to BNPL Solutions.
Why is the European legislator focusing on BNPL?
Currently, most BNPL Solutions benefit from an exemption applicable to credit, which has to be repaid within a short period and involves only insignificant costs3. This exemption fostered business models offering near-instant financing at the point of sale, often seamlessly integrated into the online checkout process.
However, the European legislator is of the view that BNPL Solutions create the misleading impression of "free credit", even though substantial charges could apply in the event of late payment.
The recitals to CCD II also highlight the risk that BNPL Solutions encourage impulsive purchasing decisions, without consumers being adequately informed of the financial commitments they are undertaking.
A paradigm shift
CCD II has a more restrictive approach towards the exemption traditionally relied upon by BNPL providers.
Deferred payment arrangements will only remain outside the scope of consumer credit legislation in very limited circumstances. In particular, the exemption will essentially be reserved for situations where the supplier itself grants the payment deferral to the consumer, without the involvement of a third-party lender, where the deferred payment is entirely free of charge, and where repayment takes place within a maximum period of 50 days.
Conversely, where a third party intervenes to finance BNPL Solutions which is the business model of a large number of existing BNPL providers, such BNPL Solutions will generally qualify as consumer credit agreements and will consequently become subject to a range of applicable requirements, including enhanced pre-contractual information obligations, creditworthiness assessments, advertising restrictions, withdrawal rights and governance requirements.
Belgium is ready for the new regime
Unlike other European jurisdictions, Belgium already has a relatively strict regulatory framework applicable to interest-free short-term credit (including BNPL Solutions), notably limiting the exemption to interest-free loans repayable within a maximum period of two months.
The Belgian Parliament adopted the legislation implementing CCD II on 9 July 2026.
The implementation of CCD II will further broaden the scope of Belgian consumer credit legislation. The Belgian implementation specifically aims to bring within the regulatory perimeter various forms of deferred payment arrangements and low-value credit products that were previously wholly or partially excluded. The Belgian preparatory works place particular emphasis on strengthened creditworthiness assessments, stricter advertising rules and enhanced consumer information requirements.
Key dates
CCD II was required to be implemented by Member States by 20 November 2025 and becoming fully applicable as from 20 November 2026.
Towards a more mature BNPL market
The objective pursued by the European legislator is not to prohibit BNPL Solutions,
but rather to avoid that products economically comparable to consumer credit could, in certain circumstances, escape the protective rules applicable to other lenders distributing similar products.
CCD II therefore marks an important milestone in the regulation of the European embedded finance markets, by subjecting these innovative business models to requirements similar to those applying to more traditional forms of consumer credit.
1 CCD II, recital 16.
2 Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers.
3Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers, art.2.
