Shop Pay Installments compliance and regulation guidelines
Your marketing material and terms need to comply with various regulations, including state and federal lending laws, the Equal Credit Opportunity Act, the Truth in Lending Act (TILA), the Controlling the Assault of Non-Solicited Pornography And Marketing (CAN-SPAM) Act, and the Federal Trade Commission (FTC) advertising and marketing rules, which include endorsement guidelines and full disclosure requirements.
When you create marketing material to promote Shop Pay Installments, you need to use approved messaging and guidelines.
Fair lending guidelines
Fair lending guidelines are regulated by the Equal Credit Opportunity Act (ECOA). To promote Shop Pay Installments, you need to:
- Avoid adding requirements to the application process.
- Make Shop Pay Installments available to all customers by encouraging everyone to apply.
- Target a broad demographic.
- Treat similarly situated individuals the same.
Don't use your Shop Pay Installments marketing material to target specific demographics based on one or more of the following:
- age (provided the applicant has the capacity to contract)
- color of skin
- income dependency on a public assistance program
- marital status
- national origin
- sexual orientation
If your Shop Pay Installments marketing material targets specific groups, then you're not giving all individuals an equal opportunity to use Shop Pay Installments. Depending on how much of your marketing material is about financing, by targeting specific groups, you increase your risk of breaking fair lending laws. This can lead to lawsuits or fines.
Although your products might be attractive to a specific demographic, your marketing material should target a broad demographic if it includes content about financing.
Learn more about the Federal Trade Commission's basic provisions of the ECOA.
Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
To reduce the risk of misleading customers, your marketing material needs to:
- avoid using misrepresentations, omissions, or other deceptive claims
- avoid a false sense of urgency
- be honest
- be clear and easy to understand
- include all relevant information
- support claims with facts about the product
If you offer a promotion or rebate, such as a risk-free trial or money-back guarantee, then you should always honor the promotion.
If you advertise any free trials, then you should always ensure the trial is actually free, including any interest that might accrue.
Learn more about UDAAP.
The Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) requires that customers receive disclosures about important terms of credit before they have to pay back their loan. When advertising terms of credit, advertisements can only state terms that are available.
When you mention specific terms of credit, known as "trigger terms", in your marketing material, you need to outline the full terms of repayment to your customers.You can use representative examples to provide clarity on the trigger terms, and show your customers what a real loan might look like.
The representative example needs to include the following information:
- purchase price (loan amount)
- monthly payment amount
- length of loan term
- annual percentage rate (APR)
Consider the following instance of how to use a representative example:
- An $800 purchase could be split into 12 monthly payments of $72.21 at 15% APR, or 4 interest-free payments of $200 every 2 weeks.
Messages requiring a representative example
These messages include trigger terms that require a representative example:
- The number of payments, if more than 4 payments. For example, 6 payments.
- The period of repayment. For example, 6 months, or 12 months.
- The monthly payment amount. For example, as low as $60/month
- The amount of interest. For example, as low as 10% APR.
- The amount or percentage of any down payment. For example, $100 or 25%.
These messages don't require a representative example. Other disclosures might still be required:
- Monthly payments
- Pay over time
- Buy now, pay later
- As low as 0% APR
- 0% APR or 10-36% APR
- 4 interest-free payments
Learn more about the Truth in Lending Act.