BrazilEU retailers offering Buy Now Pay Later must comply with new CCD2 rules
The second Consumer Credit Directive (CCD2) is set to come into effect next year, introducing stricter rules on lending rates and costs. European retailers that offer buy now pay later (BNPL) options will need to make sure they are compliant and at the same time review their business models.
The CCD2 is a revised EU directive that will replace CCD1, which is in place since 2008. The new directive aims to enhance consumer protection and harmonize the European credit market by expanding its scope to cover all non-mortgage loans up to €100,000, including buy now pay later and overdrafts.
The 2008 Consumer Credit Directive (CCD1) aimed to establish a harmonized EU framework for consumer credit by facilitating a smoothly functioning internal market and providing a high degree of consumer protection. Though the European Parliament made a series of revisions to CCD1 in an attempt to keep up with a rapidly changing credit market, it was clear that leaders would need to go back to the drawing board and create a new directive.
The scope of the CCD2 will be wider, covering non-mortgage loans up to €100,000, while the CCD1 only covered up to €75,000. Full implementation of CCD2 is expected by Q4 2026, following its transposition into national laws by the end of 2025.
What it means for BNPL
The new rules under CCD2 will mean that BNPL offerings need to have fee caps, which will protect consumers from excessive costs.
Under CCD2, BNPL services are classified as credit, meaning late repayment fees and interest charges must comply with local annual percentage rate (APR) caps. This could significantly alter current pricing models.
Each EU country is free to set their APR caps. These national differences could create significant challenges for BNPL providers, who must adjust their pricing strategies to remain compliant. Complying with local APRs will require country-specific pricing adjustments.
For example, in the Netherlands, the maximum late payment fee for a €100 payment delayed by two months would be €2.50 at a 15% annual cap, significantly lower than the current €15.00. Sweden’s cap would allow for a €7.13 fee, while Belgium's higher threshold of €20 for credit under €150 means the current €15.00 fee would remain compliant.
The CCD2 rules will mean that providers also need to conduct risk assessments on consumers that want to use BNPL services. That will include a thorough creditworthiness check and an evaluation of the consumer’s ability to repay.
To meet these requirements, BNPL providers will need to establish connections with credit institutions across member states in order to access reliable financial data for more accurate solvency evaluations.
Consumers might face fewer unpleasant surprises: The CCD2 mandates stricter guidelines on clear and detailed communication of the terms, risks, and costs involved in borrowing. Currently, BNPL services often lack clear communication about associated risks. Under the new directive, creditors must be explicit about credit terms and consumer rights.
BNPL providers must revamp their business models
CCD2 will significantly pressure BNPL providers to adapt their business models. Compliance with stricter requirements will increase operational costs, forcing providers to either raise fees for merchants or introduce minimum spending thresholds for BNPL services.
In a nutshell, these rules will help to protect consumers and are meant to cut back on overconsumption and frivolous debts. But, on the other hand, they may also limit the availability of BNPL options because the application process will be more cumbersome and pricing may be affected.
“The CCD2 marks a pivotal moment for BNPL services in Europe,” said Tim de Vries, partner at Oliver Wyman. “By enforcing stricter regulations on fee caps, credit assessments, and transparency, CCD2 aims to enhance consumer protection while addressing rising debt concerns. Although these changes may challenge existing providers and limit accessibility, they also create opportunities for banks to enter the BNPL ecosystem.”
Growing market
The European BNPL market has been growing steadily with a CAGR of over 20% since 2021. By the end of 2030, the market could reach $293.7 billion, up from $170.2 billion in 2024. The popularity of BNPL is fuelled by the overall growth in ecommerce and expanding instant credit solutions from players like Klarna, Afterpay (Riverty), and PayPal.
