Measures to Prevent Young or Compulsive Buyers from Taking on Too Much Debt via Purchases on Digital Platforms
Prime Minister's OfficeSpeakers
Summary
This question concerns measures to prevent excessive debt among young or impulsive buyers using "Buy now, Pay later" (BNPL) platforms, as raised by Miss Cheryl Chan Wei Ling. Miss Cheryl Chan Wei Ling suggested implementing income verification and a centralized system to track total debt across credit cards and digital platforms. Senior Minister Tharman Shanmugaratnam responded that the government is studying if BNPL regulation is necessary while examining the adequacy of existing risk management practices. He noted that current schemes are generally limited to small-value purchases with capped late fees and are indirectly restricted by credit card limits used for repayments. Any future regulatory framework will be proportionate to the risks, and MAS is currently working with the media to educate consumers on credit pitfalls.
Transcript
65 Miss Cheryl Chan Wei Ling asked the Prime Minister with regard to "Buy now, Pay later" digital platforms (a) what measures are implemented to prevent the young or compulsive buyers from taking on too much debt; (b) whether there are plans to verify the income of those using these platforms for purchases; and (c) whether a centralised system can be used to check the advance taken between credit cards and these platforms.
Mr Tharman Shanmugaratnam (for the Prime Minister): “Buy now, Pay later” (BNPL) schemes are typically offered by digital platforms to enable consumers to pay for their purchases in instalments. As in most jurisdictions, BNPL schemes fall outside of MAS’ regulations on credit, which apply to banks and finance companies.
Using BNPL schemes, like traditional instalment plans, can make purchases appear more affordable. MAS shares Miss Cheryl Chan’s concern that BNPL could lead to excessive consumer borrowing, especially among youth and impulsive buyers.
MAS and other Government agencies are hence examining if some form of regulation is necessary for BNPL schemes. The measures that Miss Cheryl Chan referred to will be considered as part of this study.
We will examine the adequacy of existing risk management practices and safeguards against people chalking up excessive debts. Currently, most BNPL schemes are restricted to small-value purchases. Late fees apply instead of interest and the fees are typically capped instead of accruing continuously until the outstandings are paid. Further, existing limits on unsecured consumer credit will cap the spending on BNPL schemes when repayments are made using credit cards. If a regulatory framework is deemed necessary, it will be proportionate to the risks and ensure that any potential convenience afforded by these BNPL schemes are not unduly curtailed.
In the meantime, MAS has worked with the media to highlight the pitfalls of taking on excessive credit, including the considerations that consumers should bear in mind before entering into a BNPL scheme. Consumers should be mindful that late fees or charges will apply for missed re-payments.