Latest news with #vanPletzen
eNCA
7 days ago
- Business
- eNCA
Surge in ‘Buy Now, Pay Later' Services Puts SA Consumers at Risk
Microfinance South Africa (MFSA) has issued a stark warning over the explosive growth of Buy Now, Pay Later (BNPL) services in the country, cautioning that the unregulated credit model is pushing millions of South Africans into unsustainable debt. Speaking to the E&C Money Desk, MFSA CEO Leonie van Pletzen called on regulators to act urgently, describing BNPL as a 'disguised form of credit' that bypasses critical consumer protections embedded in the National Credit Act. 'We're seeing an alarming rise in BNPL products, and they operate largely outside South Africa's regulated credit space,' said van Pletzen. 'There's no proper affordability assessment being done, this debt doesn't show up on credit bureaus.' A Credit Trap Disguised as Convenience BNPL services are typically marketed as interest-free, short-term payment options that allow consumers to spread the cost of purchases. But van Pletzen warns that this seemingly simple payment solution often hides steep fees and penalties for missed payments, which can quickly spiral out of control. 'It's marketed as an interest-free option, but the reality is quite different,' she explained. 'Consumers are drawn in by the promise of no interest, but there are high late fees, account charges and penalties if you do default on these payments It acts like credit, but it isn't credit and it isn't regulated as such.' Because BNPL providers fall outside the National Credit Act, consumers using these products are not protected by the National Credit Regulator or the Financial Ombud. This creates a gap in legal recourse, particularly in the event of default or dispute. There are critical consumer protections items missing due to the lack for regulation. Pletzen explains 'if a consumer defaults, there's no protection of, say, for instance, the National Financial Ombud, because it's not seen as a credit agreement. There's no protection by the National Credit Act or the National Credit Regulator. A consumer can apply for 50,000 Rand, you can actually not afford it'. A Blind Spot in the Credit System One of the MFSA's biggest concerns is that BNPL debt is not reflected on credit bureaus, meaning traditional lenders have no visibility into a consumer's full financial obligations. 'We have members who are registered lenders flying blind,' van Pletzen said. 'Consumers come in for loans, and their BNPL obligations aren't visible anywhere. In some cases, people have six to ten of these accounts running simultaneously.' Without full disclosure of liabilities, it becomes nearly impossible to conduct accurate affordability assessments, potentially exposing both the consumer and the lender to risk. Who's Most at Risk? According to MFSA, lower- and middle-income earners are the most vulnerable. These groups often turn to BNPL to make ends meet, particularly in a high-inflation, low-growth economic environment. But without regulation, they're exposed to exploitation and mounting debt. 'We are urgently asking for regulation to ensure proper oversight and to protect the South African consumer from slipping further into over-indebtedness,' van Pletzen concluded. Regulatory Response Needed
IOL News
11-08-2025
- Business
- IOL News
Unregulated Buy Now, Pay Later services could push millions of SA consumers into financial ruin
Buy Now, Pay Later is presented as a modern, interest-free payment solution, however in reality it functions as credit. Image: Simphiwe Mbokazi/ Independent Media MicroFinance South Africa (MFSA) has warned that the unchecked rise of Buy Now, Pay Later (BNPL) credit services is exposing millions of South Africans to unsustainable debt, hidden costs, and financial exploitation, and is urging regulators to act swiftly. MFSA CEO Leonie van Pletzen said the largely unregulated system is particularly concerning for low-income workers, young consumers, and an already over-indebted population. 'Without urgent intervention, this growing shadow credit system could lead to devastating consequences,' she said. BNPL lets shoppers pay for products in instalments over a set period, often interest-free and without service fees. While promoted as a modern, convenient payment option, van Pletzen said it is 'in reality… credit that is not subject to the core protections of the National Credit Act (NCA)'. MFSA has found individuals stacking multiple BNPL products without affordability checks, credit bureau reporting, or understanding the long-term costs. As of June, BNPL's status under the NCA or the Financial Advisory and Intermediary Services Act remains unclear. The Intergovernmental Fintech Working Group has noted that BNPL currently sits in a regulatory void, with the National Credit Regulator and Financial Sector Conduct Authority each overseeing separate, unrelated laws. MFSA said BNPL is now being used for essentials such as groceries, utilities, transport, and healthcare — not just luxury purchases. 'This signals an alarming dependency on unregulated debt for basic living expenses,' said van Pletzen, warning that consumers often don't realise they are entering credit agreements due to marketing tactics and lack of formal disclosures. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ BNPL platforms can approve up to R30 000 in credit in under three minutes, with some issuing over 100 000 new accounts per month. Approval rates range from 50% to 70%, with penalty fees — capped at around R255 per late transaction — charged weekly. MFSA has called for BNPL providers to be brought under the NCA, with mandatory affordability assessments, full credit bureau reporting, standardised disclosures, licensing or registration, and access to dispute resolution through an ombudsman. 'South Africa is now at a critical crossroad,' van Pletzen said. 'Either allow BNPL to continue growing unchecked, or proactively regulate it to protect consumers and maintain the integrity of the financial system.' IOL Business
