Gotchas when 'Buy Now, Pay Later': EU Courts Wants Clarity in Advertising for Consumers
Consumers Entitled to Clear Information About 'Buy on Account' Advertising: ECJ Insists - ECJ Advocates Transparent Details for Consumers in Advertising Accounts
Got caught off guard by a 'convenient' buy now, pay later deal from Bonprix in December 2021? You're not alone. Consumer centers noticed the misleading nature of this promise, as potential buyers were left clueless about potential creditworthiness checks required.
The case made its way to the Federal Court of Justice (BGH) in Karlsruhe, which, in turn, sought clarification from the European Court of Justice (ECJ) on the definition of a 'sales promotion offer' under EU law. Determining whether Bonprix’s claim constitutes such an offer is crucial, as it might have necessitated disclosure of creditworthiness checks in their advertising.
The ECJ hasn't ruled on Bonprix's specific ad, but it has set indicators for what constitutes a 'sales promotion offer' in general. Such offers are any references providing customers an advantage that may influence their purchasing decisions, giving them the ability to pay later. This advantage can be financial or merely convenient. In essence, the ECJ considers the flexibility of paying later as a minor financial advantage.
Customers also retain the option to withdraw from the contract without applying for a refund, potentially incentivizing them to choose this payment method. The seller is then obligated to inform customers of the conditions for 'pay later' deals under these circumstances.
Eventually, the BGH will decide if this applies to Bonprix, following the ECJ’s legal opinion on clear, prominent disclosure in sales promotions involving 'buy now, pay later'. The consumer centers' appeal still remains unresolved in Karlsruhe.
EU Law's take on the Matter
The European Union stresses transparency and consumer protection in its interpretation of 'sales promotion offers' in ads featuring 'buy now, pay later'. This focus is an extension of broader EU guidelines on distance selling and e-commerce.
Key principles of EU law include:
- Clear and Prominent Disclosure: Sellers must openly disclose essential information regarding the offer before the consumer confirms the order.
- Acknowledgement of Payment Commitment: Consumers must explicitly acknowledge their financial obligations when choosing promotional payment terms.
- Information Adapted to Sales Channel: For limited formats such as text messages or mobile phones, minimum information is to be provided, with a link to comprehensive details for full transparency.
- Focus on Consumer Protection: EU law treats 'buy now, pay later' as part of the overall sales contract, subjecting it to the same consumer protection rules governing distance and off-premises sales.
Under EU law, 'buy now, pay later' options must not obscure the true cost to the consumer, and advertisers must comply with transparency and disclosure requirements. The total cost, including any fees and deferred payment terms, must be clearly stated, and consumers' payment obligations must be unambiguous at the time of contract conclusion.
These guidelines promote transparency and uphold consumer rights in the e-commerce and distance selling sector.
- The European Union emphasizes the need for clear and prominent disclosure in advertisements that feature 'buy now, pay later' options, as part of their broader focus on transparency and consumer protection in e-commerce and distance selling.
- To adhere to EU law, 'buy now, pay later' options must not obscure the true cost to the consumer, requiring advertisers to comply with transparency and disclosure requirements, ensuring that the total cost, including any fees and deferred payment terms, is clearly stated, and consumers' payment obligations are unambiguous at the time of contract conclusion.
