Denmark
Status
Legislation passed.
Is the country considering regulation?
On May 4, 2023, the legislative amendment no. 479 of 12/05/2023 to the Danish Consumer Credit Companies Act and to the Danish Credit Agreement Act (the “Legislative Amendment”) was passed. The law entered into force on July 1, 2023.
Current state of regulation regarding BNPL?
See above.Outline the proposals to change regulation?
Reasoning behind the Legislative Amendment:
In recent years, credit offered to consumers has evolved and diversified considerably in Denmark. New credit products have appeared, particularly in the online environment, and their use continues to develop. More specifically, there has been an increase in the number of companies offering BNPL credit. While these loans are free of interest and charges, missing a payment can result in a default on the credit agreement and providers may charge interest on late payments and reminder fees. This practice entails risk for consumers as, under the previous legal framework, it may result in a debt the consumers are not able to pay back, with unpredictable fees as a result. The Legislative Amendment therefore implements an initiative aimed at increasing consumer protection by including this type of loan within the scope of the Danish Consumer Credit Companies Act and the Danish Credit Agreement Act.
Changes implemented:
The changes essentially consist of an extension of the types of credit agreements covered by the scope of the laws. The former Danish Credit Agreement Act, article 3(1), no. 1, and the Danish Consumer Credit Companies Act article 1(3), no. 1, exempted BNPL products offered free of interest and other charges from their scope. With the legislative amendment, the excemption for BNPL products offered free of interest and other charges will be narrowed significantly to only cover credit agreements that fulfill all the following requirements:
1) the agreement is a contract for purchase of goods/services;
2) the deferred payment of the purchase price is free of interest and charges;
3) the deferred payment is granted directly by the seller of the goods/services (with no third party providing the credit), and
4) the deferment period is no longer than 90 days after the time of delivery.
What if any will be the consequences of BNPL legislation on merchants, brokers and consumers.
Merchants:
BNPL credit offered by merchants that does not fall within the scope of the above exemption will, from July 1, 2023, be subject to the requirements of the Danish Credit Agreement Act and the Danish Consumer Credit Companies Act.
This means that such merchants will have to comply with the Danish Credit Agreement Act’s requirements, including performing creditworthiness assessments and adhering to information requirements, and the Danish Consumer Credit Companies Act’s requirements, including obtaining authorization from the Danish FSA.
However, merchants can still offer their customers interest- and cost-free credit agreements without falling under the scope of the laws, provided that i) the consumer must pay within 90 days of the delivery date and ii) the credit is not provided by a third party.
Third party credit providers:
The new rules extend the Danish Credit Agreement Act and the Danish Consumer Credit Companies Act to third-party providers of BNPL credit. This means that such credit providers will have to comply with the requirements of these laws as referenced above.
Third party credit brokers:
The Legislative Amendment only brings within the scope of the Danish Credit Agreement Act and the Danish Consumer Credit Companies Act third parties “providing credit”. Thus, third parties acting merely as brokers between consumers and providers of credit, without themselves providing credit, do not fall within the scope of the Danish Credit Agreement Act and the Danish Consumer Credit Companies Act.
Consumers:
For consumers the Legislative Amendment will entail increased protection against opaque credit schemes. In particular, the assessment of consumers' creditworthiness to assess whether the consumer will be able to pay the assumed repayments on the credit amount will reduce the risk of vulnerable consumers being put in a financially unmanageable situation by taking out BNPL credit.
