UK Financial Conduct Authority Cautions BNPL Providers on Misleading Promotions

The UK Financial Conduct Authority (FCA) has issued a warning to Buy Now – Pay Later (BNPL) providers pertaining to misleading advertisements. A copy of the “Dear CEO” letter sent to BNPLs is viewable here.

BNPL platforms offer point of sale credit to consumers which may select to pay for purchase over time. BNPLs frequently position their services as a better alternative to credit cards.

The FCA states that all BNPL promotions must adhere to financial promotion rules. If BNPLs don’t have an FCA-authorised firm approve their financial promotions than may be transgressing the law. The regulator states that “BNPL financial promotions must be clear, fair and not misleading.”

The FCA says it is concerned consumers could be misled if there are not prominent warnings of 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, commented on the warning:

“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 FCA notes that 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.

The FCA adds that it will use criminal and regulatory enforcement powers if it sees promotions that do not comply.

During 2021, FCA reports that actions against firms that have breached its rules have led to 4,226 promotions being changed or withdrawn.

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