The UK Financial Conduct Authority (FCA) has secured changes to consumer terms from popular buy now, pay later platforms, according to a statement from the regulator. The FCA states that terms in the contracts of Clearpay, Klarna, Laybuy, and Openpay have been “unclear” and “unfair.”
The FCA explains that even though the BNPL agreements offered by these firms are not yet regulated, it was able to use the Consumer Rights Act to assess the fairness and transparency of the terms. One of the terms that involved late payment fees has resulted in Clearpay Laybuy, and Openpay agreeing to voluntarily refund customers who have been charged late payment fees in specific circumstances.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, commented:
“Buy-Now Pay-Later has grown exponentially. We do not yet have powers to regulate these firms, but we do have powers to review the terms and conditions of consumer contracts for fairness, and have acted proactively to ensure that the BNPL industry adopts high standards in their terms and conditions. The four BNPL firms we have worked with have all voluntarily agreed to change their approach. We welcome this and hope that the rest of the industry will now follow.”
The FCA shares that the use of BNPL products nearly quadrupled in 2020 to £2.7 billion. The UK government plans to change the law to bring some of the current forms of unregulated BNPL products into FCA regulation.
BNPL products have jumped in popularity as a possible less costly option to credit cards. BNPL services are typically available at the point of sale – both online and at physical retail locations.