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 eNCA, 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 R50,000, butcan 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
As BNPL continues to gain popularity in South Africa, especially in the digital retail space calls for oversight are growing louder. MFSA is urging policymakers and financial regulators to step in before the sector spirals into a broader credit crisis.
For now, the message to consumers is clear: BNPL may look convenient, but it comes with risks. Read the fine print, know your rights, and when in doubt, seek advice before signing up.