FCA warns Buy Now, Pay Later operators against misleading advertisement

Friday 19 August 2022 14:35 CET | News

The Financial Conduct Authority has issued a warning directed at companies offering Buy Now, Pay Later products that all financial promotions of BNPL products must comply with the financial promotion rules in spite of occasional legal loopholes.


More to the point, the FCA emphasises the fact that unauthorised firms might be committing a criminal offence if they don’t have an FCA-authorised firm approve their financial promotions. Authorised companies commercialising unregulated or exempt BNPL products have the obligation to comply with the relevant rules unless an exemption applies. This includes that their BNPL financial promotions must be clear, fair, and not misleading, the official FCA post states.. 

According to the communication posted on the FCA official website, the financial regulator is concerned consumers could be misled if BNPL financial promotions do not comply and officials revealed that they have discovered financial adverts on websites and social media, including posts by social media influencers, which may breach FCA rules. An example that is given regards 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 cannot afford to repay  

  • the consequences of missed payments  

  • any other adverse consequences such as the impact on the customer's credit file  

  • information about when charges become payable

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, made the following official statement on the FCA website: '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. 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.'

The Financial Conduct Authority has issued a warning directed at companies offering Buy Now, Pay Later


UK and the need for better BNPL regulation

Although the FCA does not yet regulate BNPL products, it has been proactively addressing concerns about potential harms to consumers. The FCA recently held a roundtable with BNPL providers to discuss upcoming regulation. The regulator called on BNPL providers to better support borrowers in financial difficulty, including signposting to money guidance and debt advice.

Earlier in 2022 the FCA worked with BNPL firms to secure changes to potentially unfair and unclear terms in BNPL contracts using powers under the Consumer Rights Act. More specifically, Adriana Ellice-Flint from receeve explained for The Paypers in an editorial published in July 2022 that The UK Treasury said Buy Now, Pay Later (BNPL) firms would come under the supervision of the Financial Conduct Authority (FCA) by 2023.

The expert explained that the plan proposed suggests that lenders will be required to ensure loans are affordable and rules will be amended to ensure advertisements are fair, clear, and not misleading. The Government will expand rules to cover other forms of unsecured short-term credit that pose similar risks to consumers, such as those used for dentistry work, etc. Lenders offering the product will need to be approved by the Financial Conduct Authority (FCA), and borrowers will also be able to make a complaint to the Financial Ombudsman Service (FOS).

The FCA mentioned in its recent communication to the market that it is continuing to engage with BNPL providers and are proactively monitoring the market to ensure expectations are met. The FCA has confirmed it will use criminal and regulatory enforcement powers if it sees promotions that do not comply. So far in 2022, the regulator’s action against BNPL providers that have breached its rules have led to 4,226 promotions being changed or withdrawn, the FCA statement revealed.

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Keywords: BNPL, regulation, ecommerce, online shopping
Categories: Payments & Commerce
Countries: United Kingdom
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