Four major "Buy-Now-Pay-Later" firms have agreed change ‘potentially unfair and unclear terms and conditions’ after an intervention from the financial regulator.
The Financal Conduct Authority (FCA) said it has been able to the Consumer Rights Act to enforce the changes regarding the fairness and transparency of contract terms, even though it does not have the powers to regulate the Buy-Now-Pay-Later sector to the same standard as other consumer credit companies.
The regulator had been concerned there was a potential risk of harm to consumers as a result of the way some of the firms' terms were drafted.
Clearpay, Klarna, Laybuy and Openpay have since voluntarily agreed to change contract terms on cancellations and continuous payment authority to make them “fairer and easier to understand”, according to an FCA spokesperson.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
"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."
A review by former FCA acting CEO Christopher Woolard in February 2021 found the use of Buy-Now Pay-Later (BNPL) products had trebled in 2020 to £2.7 billion, and concluded BNPL could pose potential consumer harm that need to be addressed as soon as possible.
Britain's finance ministry has since promised to bring forward legislation to regulate BNPL products.The FCA said it will consult on rules for BNPL after the government has decided which firms and activities will be regulated.
Read the full FCA article here