FCA warns buy-now-pay-later firms to get their promotions in order

by | Aug 19, 2022

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The Financial Conduct Authority warned buy-now-pay-later firms that its products needed to comply with financial promotion rules on Friday, even though some agreements were “unregulated”.
So-called buy-now-pay-later (BNPL) offers have exploded in recent years, with the concept being the bread-and-butter for companies such as Klarna, Clearpay and Laybuy, more traditional payment provider PayPal getting in on it, and banks starting to dip their toes in the sector.

The City regulator said authorised firms selling unregulated or exempt products needed to comply with the rules, meaning that BNPL financial promotions needed to be “clear, fair and not misleading”.

The FCA said it was concerned consumers could be misled if BNPL financial promotions did not comply, adding that it had seen financial adverts on websites and social media, including posts by social media influencers, which could breach FCA rules.


For example, it cited adverts emphasising the benefits of BNPL products without fair and prominent warnings of any risks to customers, such as the risk of taking on debt that customers could not afford to repay, the consequences of missed payments , and any other adverse consequences such as the impact on the customer’s credit file, as well as information about when charges would become payable.

“As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services,” said the FCA’s executive director of consumers and competition, Sheldon Mills.

“Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions. It is vital that adverts are clear, fair and not misleading.”


Although the FCA did not yet regulate BNPL products, it said it had been “proactively addressing” concerns about potential harms to consumers.

It recently held a roundtable with BNPL providers to discuss upcoming regulation, and called on firms to do more to support borrowers in financial difficulty, including signposting to money guidance and debt advice.

Earlier in the year, the FCA worked with BNPL firms to secure changes to potentially unfair and unclear terms in BNPL contracts using its powers under the Consumer Rights Act.


The FCA said it was continuing to engage with BNPL providers, and was “proactively monitoring” the market to ensure expectations are met.

It confirmed it would use criminal and regulatory enforcement powers if it saw promotions that did not comply.

So far this year, FCA action against firms that had breached its rules had led to 4,226 promotions being changed or withdrawn.

Reporting by Josh White at Sharecast.com.

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