Companies are increasingly marketing payment plans called buy now, pay later (BNPL). Although the exact terms of BNPL plans vary, people typically pay for their purchases over a period of weeks, often in equal installments. In an effort to convert consumers into customers, companies often make various claims about the costs and conditions of BNPL plans.If your business offers BNPL payment options as a retailer or BNPL company – Alternatively, if you hold a role in the BNPL ecosystem as a marketer, collector, etc., please remember that the basic consumer protection ground rules of the Federal Trade Commission Act apply.
Here are three key principles to keep in mind when checking your company for BNPL compliance.
The claim must be true for a typical consumer. Money is material. Misrepresentations about product costs or transaction terms, including related fees, are deceptive and violate the Federal Trade Commission Act. For some consumers, that’s not enough to live up to the advertised results. The statement must be true for a typical consumer. The Federal Trade Commission has taken action against financial companies, retailers and others for advertising claims that only apply to a small group of people. For example, a company’s claim that its payment plan is “zero cost” may be deceptive if the typical customer actually incurs fees. Companies making claims on BNPL and other payment plans must ensure their claims are supported by reliable data.
Think about consumer understanding, not just conversion. Today’s online shopping environment allows companies to collect (and monetize) vast amounts of data about consumer demographics and habits. Collecting this data allows companies to more precisely test the impact of their claims and warnings on consumer “conversions,” click-through rates, and lift—all terms used to describe how to turn consumers into customers.However, as discussed In a recent FTC staff report, In “Bringing Dark Mode into the Light” and related workshops, companies that focus too much on conversions run the risk of hiding or obscuring important messages from consumers, whether that’s asking users to navigate a maze of screens or use nondescript drop-down menus. Or small icons, or burying information in dense terms of service documents. When designing and integrating user interfaces that offer BNPL or other payment plans to consumers, and using aggregated or personalized consumer data to do so, companies must be careful to view transactions from the consumer’s perspective. Avoid dark patterns that negatively impact their understanding of the material terms of the deal.
If something goes wrong, companies cannot absolve themselves of responsibility by blaming others in the ecosystem. Decades of FTC enforcement have demonstrated that the presence of multiple participants in a transaction does not avoid liability. When retailers and BNPL companies offer payment plans to consumers, both parties can be held liable if people are deceived or treated unfairly. For example, what if a customer returns a product, cancels an order, or a retailer cancels an order through the BNPL program? If a customer does not receive a refund in a timely manner, any company that makes misleading statements about what will happen in that situation, and anyone involved in delayed refunds, could be held liable under the Federal Trade Commission Act. Even if the person eventually gets their money back, the time they spent in the process counts as harm under the FTC Act, especially if they had to contact a company (or companies) multiple times or wait weeks to receive a refund.
What is the key message for businesses participating in the BNPL payment scheme? Avoid deceptive or unfair tactics in what you say to consumers, how you communicate important messages, and how you treat consumers throughout the transaction lifecycle.
