Germany: “Buy Now Pay Later” – BMJV publishes draft bill to implement the new Consumer Credit Directive

On 23 June 2025, the Federal Ministry of Justice and Consumer Protection (‘BMJV’) published the draft bill for the implementation of Directive (EU) 2023/2225 on consumer credit agreements (the ‘draft bill’).

The draft bill serves to implement Directive (EU) 2023/2225 on consumer credit agreements (the ‘new Consumer Credit Directive’). The new Consumer Credit Directive must be transposed into national law by 20 November 2025 and applied by the Member States of the European Union (the ‘Member States’) from 20 November 2026.

The primary objective of the new Consumer Credit Directive is to contribute to a high level of consumer protection and to promote the internal market for credit between businesses and consumers.

The proposed amendments significantly extend consumer protection. For example, previously unregulated forms of credit are included in the regulations on consumer credit for the first time. This means that complex ‘Buy Now Pay Later’ (‘BNPL’) models involving institutional participation are covered by the regulations.

What is BNPL?

The term BNPL refers to digital payment models in which purchasers receive goods or services immediately, but payment is made in full or in part at a later date. In practice, such offers are often interest-free and fee-free for consumers and are provided either by the retailer itself or by third-party providers.

The new Consumer Credit Directive defines BNPL as digital financial tools whereby the creditor grants credit to a consumer for the exclusive purpose of purchasing goods or services provided by a supplier, that let consumers make purchases and pay them off over time.

BNPL-models can be broadly divided into three types: 

1. Payment deferrals with a one-off payment after, for example, 30 days (such as ‘purchase on account’)
2. Instalment solutions with a few, often interest-free instalments (e.g. 3 instalments in 60 days) and
3. Classic instalment loans with longer terms and interest.

What is the current regulation?

There is currently no specific regulation for BNPL in Germany. However, the provision of BNPL products may fall under other existing regulations, such as the regulation of payment services, factoring or lending.

The legal classification depends on the specific design of the respective BNPL model.

If the retailer itself grants a short-term deferral of payment, for example by making the purchase price payable after 30 days, this constitutes a deferral of the purchase price. In this case, the retailer does not grant a loan for regulatory purposes – i.e. it does not engage in lending business that would require a licence from the Federal Financial Supervisory Authority (BaFin). However, depending on the specific structure of the offer, consumer protection requirements may apply – in particular obligations to inform the consumer, to check their creditworthiness and other requirements under consumer loan agreement law. Currently, there is a legal exception to such obligations if the deferral of payment lasts less than three months and only incurs minor costs or is less than EUR 200. According to the current draft bill, these exceptions will be abolished in future in line with the new Consumer Credit Directive.

Third parties that enable merchants to offer BNPL services (‘BNPL service providers’) may also be subject to regulatory obligations. If, for example, the BNPL service provider grants the customer a loan and the merchant is paid directly from the loan amount, it is very likely that a licence for the credit business will be required. If, on the other hand, the retailer grants the deferral of the purchase price itself and then sells the payment claim to the BNPL service provider, this may qualify as factoring. Factoring is a financial service subject to authorisation, for the provision of which a licence is also required in Germany.

What are the new regulations?

The draft bill provides for a comprehensive expansion of German consumer loan law in order to achieve full harmonisation with the revised Consumer Credit Directive. Key changes include:

1. Extension of the scope: In future, small loans of less than EUR 200, interest-free loans and short-term loans with low costs will also be covered, which means that BNPL products will fall within the scope.
2. Stricter requirements for creditworthiness checks: Lending will only be permitted if it is highly probable that the loan will be repaid.
3. Extension of information requirements: Introduction of standardised EU forms to improve transparency.
4. Obligation to take forbearance measures: Lenders will be required to offer consumers in financial difficulties appropriate adjustments, such as deferral of payments or extension of the term, before terminating the credit agreement or initiating enforcement measures.
5. Introduction of a maximum withdrawal period: The previously applicable ‘perpetual right of withdrawal’ will be abolished. In the event of incorrect information, withdrawal can only be declared within a maximum of 12 months and 14 days, provided that proper withdrawal instructions have been given.

The new Consumer Credit Directive generally obliges Member States to implement it uniformly without national deviations (full harmonisation). The draft bill takes this into account. However, the new Consumer Credit Directive allows for some leeway in certain areas. The draft bill makes use of this leeway to avoid ‘bureaucracy and overly far-reaching requirements’ – particularly in the following areas:

1. Transfer of obligations to institutions: The new Act on the Supervision of Sales Financing (Absatzfinanzierungsaufsichtsgesetz - AbsFinAG) is intended to transfer regulatory obligations to intermediary (credit, payment, e-money) institutions (or investment firm) in order to relieve smaller retailers in particular.
2. Limited information requirements: For loans not previously classified as consumer loans – specifically, small loans of less than 200 euros granted free of charge and short-term loans with only low costs if repaid within three months – a clear, one-page information sheet will suffice in future.
3. Text form instead of written form: In future, consumer loan agreements will be able to be concluded in text form.
4. No additional advertising restrictions: The draft bill tightens the rules on credit advertising. In future, the costs of taking out a loan must be indicated. However, advertising that is meaningful and often in the consumer's interest, such as advertising for quick loans, will continue to be permitted.

Outlook

The draft bill is a decisive step towards implementing the new EU Consumer Credit Directive (Directive (EU) 2023/2225).

The planned draft bill to implement the revised Consumer Credit Directive in Germany will have a noticeable impact on the BNPL sector. For consumers, the new regulations aim to significantly strengthen protection against over-indebtedness, in particular through stricter creditworthiness requirements and mandatory relief measures in the event of financial difficulties. BNPL products, which have often been exempt from regulation due to their low value or interest-free nature, will in future clearly fall within the scope of consumer credit law.

The further legislative process will continue over the coming months. Comments on the draft bill can be submitted until 18 July 2025.

With the kind support of Anna Maria Volz, Research Assistant