Breaking Down the "Buy Now, Pay Later": ECJ's Take on Transparent Advertising
Consumers must be provided with clear details about 'buy now, pay later' advertising, as per the European Court of Justice's ruling. - EU's Top Court Advocates Transparent Disclosure to Consumers about Adвърtisements on Accounts
Ever found yourself tempted by a "convenient buy now, pay later" option, only to realize the catch? Well, a leading consumer association isn't too pleased about this either. In December 2021, Bonprix used this tactic, leaving potential buyers unsure if they'd pass a creditworthiness check for this payment method. The consumer association took the retailer to court to put an end to such misleading ads.
Initially, the court didn't side with the consumer association. However, the case landed at the Federal Court of Justice (BGH) in Karlsruhe, which referred it to the European Court of Justice (ECJ) for a clearer definition of a "sales promotion offer" under EU law. The verdict could determine if Bonprix should have disclosed the creditworthiness check.
The ECJ has now weighed in, stating that a reference to a specific payment method can be a sales promotion offer if it offers customers an advantage affecting their buying decision, whether financial or convenient. To put it simply, buyers might perceive the "pay later" option as a small financial advantage due to the extended timeframe, or as an incentive due to the ease of withdrawal if they change their minds.
Therefore, an advertising statement promising such a payment method could be classified as a sales promotion offer. If so, the trader must disclose the conditions for buying on account. While the ECJ's decision doesn't directly impact Bonprix, the Federal Court of Justice must now consider the consumer association's appeal based on the ECJ's legal opinion.
In other words, the ECJ seems to be pushing for advertisers to provide clear, upfront information about payment options to help consumers make informed choices. This comes as EU regulators are working towards new protections for consumers using "Buy Now, Pay Later" services, staying ahead of the game to prevent over-indebtedness[1].
On the horizon, watch this space for the BGH's decision in Karlsruhe. No timeline for a decision has been shared as yet.
- ECJ
- Federal Court of Justice
- Consumer Association
- Creditworthiness
- Karlsruhe
- EU
- Luxembourg
- Germany
- Consumer Association Hamburg
[1] Source: EU's protection efforts against over-indebtedness related to Buy Now, Pay Later services. For more insights on the EU's stance on "Buy Now, Pay Later" as sales promotion offers, further investigation from reliable legal or regulatory sources is recommended.
- In light of the ECJ's ruling, vocational training programs in EC countries could benefit by providing clear, upfront information about their financial terms to help potential students make informed decisions, as this approach seems to be favored by regulators for ensuring transparency in consumer choices.
- For businesses operating in the European Union, the ECJ's decision on transparent advertising could also extend to other services, such as vocational training, where clear and upfront information about the costs, payment plans, and conditions for enrollment could be essential to maintaining compliance and building consumer trust.
