Making Buy Now Pay Later terms clearer and fairer

Jul 21st '22

The Financial Conduct Authority (FCA) has reviewed the contracts of Buy Now Pay Later (BNPL) firms and took assertive action to make terms fairer and clearer for consumers.


Buy Now Pay Later (BNPL) covers a wide range of credit agreements, generally used by consumers to spread the cost of purchases.


The Woolard Review into the unsecured credit market found the use of BNPL products nearly quadrupled in 2020 to £2.7 billion.


The FCA don’t currently regulate all BNPL products, but the Government intends for them to do so in the future. Before that happens, all firms must comply with consumer protection legislation, which they’re able to enforce.


Potential harm to consumers

Because the FCA had some concerns about BNPL, they looked at the terms and conditions in the contracts of four of the largest providers in this field. They found potential harm to consumers in the contracts of Clearpay, Klarna, Laybuy and Openpay.


Problems included:


  • contract cancellation terms, including late payment fees (in certain circumstances)
  • the firms’ ability to terminate or suspend accounts
  • continuous payment authority terms


Setting guidance for BNPL firms

The FCA contacted the four firms, who fully cooperated and changed their terms to make them fairer and easier for consumers to understand. Clearpay, Laybuy and Openpay also agreed to voluntarily refund customers that had been charged late payment fees in certain circumstances.


FCA published details of the changes these firms had made, and guidance for other BNPL firms in the sector to remind them of their obligations.


StepChange, Citizens Advice and Money Advice Trust all welcomed the action.


While this case is at the edge of the FCA’s remit as a regulator, it shows that, in some cases, they can deliver positive change by being proactive and getting involved early.


Source: FCA


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