Making Buy Now Pay Later terms clearer as take-up increases

Nov 23rd '23

The Financial Conduct Authority (FCA) has worked with Buy Now Pay Later (BNPL) providers to help make sure consumers have the information they need to make informed decisions about products.


While Buy Now Pay Later (BNPL) products can have benefits, it’s important that consumers have enough information to know what they’re taking on. This is even more critical as millions struggle with the rising cost of living.


The number of people using unregulated BNPL is growing. FCA research shows that more than a quarter of UK adults – 14 million people – used BNPL at least once in the 6 months to January 2023.


Frequent users (defined as using BNPL 10 or more times) are also more likely to be in financial difficulty. These users were more than 4 times as likely as other consumers to have missed a payment on a bill or credit card in 3 of the last 6 months.


Some BNPL customers don’t even realise they’ve entered into a credit agreement with these products, or that failing to repay can affect their credit score and leave them without key protections.


Setting guidance for BNPL firms 

The FCA don’t currently regulate all BNPL products. But they’ve used the influence they do work with providers including PayPal, QVC, Klarna, Clearpay, Openpay and Laybuy to encourage them to voluntarily change their contract terms so that they’re clearer and fairer. For example, making it clear what would happen if a consumer was to cancel a purchase when using BNPL.


In August 2022, the FCA also wrote to all BNPL providers to remind them that their adverts need to highlight to customers the risk of taking on debt they can’t afford to pay back. We asked them to tell customers about the consequences of missed payments and details of when they’ll have to start paying charges.


Since then, they’ve continued to work with BNPL providers to ensure these adverts are clear, fair and not misleading. As a result, firms have withdrawn or amended more than 300 adverts, and the FCA are planning more work in 2024 to protect consumers.


Source: FCA


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