Popular instant instalment services often create an illusion of affordability, causing shoppers to inadvertently lose control over their aggregate volume of obligations. The German Parliament has decided to end the practice of unchecked lending by shifting the primary responsibility for risk assessment onto financial institutions and payment services.
In the future, the legal protection of citizens when conducting credit transactions online will reach a qualitatively new level. The corresponding decision was approved by the Bundestag in Berlin as part of the implementation of updated European Union legislation. The foundation of the reform will be mandatory and more stringent creditworthiness checks, as well as strict regulation regarding the use of personal data. Federal Justice Minister Stephanie Hubig characterised the project as one of the largest consumer policy initiatives in recent decades, emphasising that the changes will directly affect millions of residents.
What Will Change
The primary innovation is that popular payment methods unified under the “Buy Now, Pay Later” (BNPL) concept are now officially equated to classic consumer credits. This means that for any service offering deferred payment, a solvency check of the client becomes a strictly mandatory procedure. Legislators aim to minimise risks, particularly among young people who tend to enter into numerous small contracts without realising how they accumulate into a critical mass of debt. According to data from the financial regulator BaFin, nearly a quarter of respondents under the age of 30 have already faced an inability to pay bills accumulated through BNPL services on time.
The criteria for creditworthiness checks are being significantly tightened. The issuance of a loan is now permitted only if the client’s financial profile makes repayment mathematically probable. Furthermore, the law introduces an ethical barrier: creditors are categorically prohibited from using information from social networks or highly sensitive data, such as information regarding a borrower’s health status, for analysis.
Additionally, the reform obliges banks and fintech companies to exercise “forbearance” toward debtors. Before commencing compulsory collection procedures, the creditor is obliged to offer a client in a difficult life situation restructuring options: an extension of the loan term or a temporary deferment of payments. Important changes also affect holders of standard accounts: banks will now only be able to close overdraft limits (Dispokredite) provided they notify the client at least two months in advance, giving the borrower time for financial manoeuvre.
Criticism from the Opposition
During the parliamentary debates, CDU MP Sebastian Steineke cited alarming statistics from the Federal Authority: as of the end of 2024 and the beginning of 2026, approximately 5.7 million people in Germany are in a state of over-indebtedness. Of particular concern is the fact that the debt trap is skewing younger. One in five Germans under the age of 30 is burdened with debt, often catalysed by aggressive payment services that encourage impulsive spending through simplified payment forms.
Representatives of the SPD, specifically Nadine Heselhaus, called the new law a “real breakthrough,” ensuring that a routine online purchase does not turn into a debt trap with long-term consequences for the citizen.
However, criticism regarding the insufficient radicalism of the measures came from the Greens and the Left Party. MP Stefan Schmidt expressed the opinion that too many loopholes remain in the protective mechanism. Critics point out that the reform only partially addresses the issue of usurious interest rates and bypasses certain types of debit cards, which may allow some financial players to continue exploiting consumer ignorance. Nevertheless, the adoption of the law marks a transition toward a more responsible model of digital consumption, where financial hygiene becomes a mandatory condition for every transaction.
Source: DPA
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