In recent years, the buy now, pay later (BNPL) funding model has attracted praise and criticism in equal measure. Though this innovative credit solution has revolutionised micro-finance markets in Kenya, it has its critics.

As with any financial contract, BNPL agreements also come with terms and conditions that consumers must carefully negotiate. One such provision that has raised concerns and questions among users and has attracted the attention of lawmakers is the “repossession clause” in these pacts.

The provision obligates a lender to reclaim the purchased item if a consumer fails to meet their repayment obligations.  Although such contracts provide transparent repossession procedures – clearly outlining the steps involved and the borrower’s rights including the repossession timeline – many consumers, often overwhelmed by the immediate benefits, overlook the fine print in the contract.  This sense of negligence can lead to unwelcome surprises if they fall behind on payments. 

The journey to owning an asset through the BNPL model typically follows several key stages.

During this period, the lender monitors the payments and provides reminders to ensure timely repayments. If the customer misses a payment, the lender usually sends a reminder or notification. 

This serves as a gentle nudge to encourage the customer to make the overdue payment. If the customer continues to miss payments, the lender increases the frequency and urgency of the communications through phone calls, emails, and SMS reminders.

Lenders often provide a grace period after the first missed payment, during which the customer can catch up on payments without facing immediate penalties. After the grace period, if payments remain outstanding, the lender sends formal notices indicating the risk of repossession. These notices outline the overdue amounts, potential penalties, and the steps the customer can take to avoid repossession. 

Before initiating repossession, the lender sends a final notice giving the customer a last opportunity to pay the overdue amounts or negotiate a new payment plan. If the customer fails to resolve the delinquency during the pre-repossession stage, the lender initiates the repossession process. It is prudent to take note that repossession is typically considered a last resort, initiated only after multiple missed payments and attempts to resolve the situation. 

Repossession of assets under the BNPL model is a challenging process, but most lenders in Kenya are committed to ensuring it is conducted with dignity and respect. 

Before initiating repossession, most lenders, for instance, prioritise clear and consistent communication with borrowers. This includes regular reminders about payment schedules, updates on outstanding balances, and warnings about the consequences of non-payment. 

By maintaining open lines of communication, lenders aim to prevent misunderstandings and provide borrowers with ample opportunity to make payments or seek assistance.

When economic conditions are volatile, most lenders often provide options for restructuring payment plans. This could involve extending payment deadlines, reducing monthly instalment amounts or offering grace periods. 

When repossession becomes unavoidable, lenders employ trained professionals who approach borrowers with empathy and respect. The goal is to ensure that the repossession is as non-disruptive as possible, acknowledging the emotional and financial strain it places on the borrower.

By combining proactive support, customised solutions, and respectful interactions, BNPL lenders are setting new standards for how financial institutions can responsibly handle defaults. These measures not only protect customers’ dignity but also foster trust and long-term loyalty in an increasingly competitive market. 

—  The writer is a Communication and PR Specialist