Over 600 stores offer controversial buy-now-pay-later in Netherlands

Over 600 stores in the Netherlands let customers buy on credit through “buy-now-pay-later” services, NOS reports based on the customer overviews of Klarma and Riverty, the two largest providers of these credit services. The Authority for Financial Markets (AFM) wants more legislation on these services, which aren’t considered consumer credit under current law, to ensure they follow the lending rules.

The Dutch businesses that offer buy-now-pay-later are mostly clothing stores. But liquor stores, furniture stores, perfume stores, and electronics stores also use this credit. H&M told NOS that the service is part of “a modern shopping experience.” It offers buy-now-pay-later in its physical and online stores. Most other companies mainly use it online.

The companies now have tens of millions of transactions annually through Riverty and Klarma. Customers only have to pay after 30 to 45 days, with no interest charged. That sound attractive, but there are risks, the AFM warned. ‘We note that the costs for late payment are unclear and may be unlawful,” the regulator said in its annual report.

About one in five users don’t pay in time and then face fines and collection costs. “That income amounts to between 20 and 40 percent of the total turnover,” the AFM said. So companies like Klarma and Riverty make a significant part of their income from defaulters.

Debt counselors are also worried about these services. The number of people in debt counseling with debts at Klarma or Riverty has doubled in the past five years, RTL Nieuws previously reported.

“This is crying out for measures,” Albert Nijholt, director of debt relief company Plangroep, told NOS. “In the last year and a half, the number of people with this type of debt has exploded.” Plangroep is helping 4,300 people with buy-now-pay-later debts. All of them already had other debts. “In some cases, this will blow existing debt arrangements. There is a real need for protection against these types of services.”

As buy-now-pay-later isn’t legally considered a loan, less strict rules apply to the services. Minister Franc Weerwind for Legal Protection recently told parliament that he expects a European plan to label these services as consumer credit - with the accompanying rules - to be ready by the summer. Because new legislation takes a long time, Weerwind also asked providers to self-regulate. The companies promised to present a plan by the end of this month.

Riverty told NOS it sent its first draft of that plan to the Minister on Friday. It includes not providing services to minors and preventing the accumulation of debts. According to the company, self-regulation is also in its own interest. “After all, we bear the risk,” Riverty said.