As the popularity of buy now, pay later (BNPL) rises, the United Kingdom’s financial regulator is asking these services to amend terms that could hurt consumers.
The Financial Conduct Authority (FCA) announced it intends for these products to be regulated by the agency Monday (Feb 14). In the meantime, the agency said such firms must comply with the consumer protections established by the Consumer Rights Act 2015 (CRA) to assess the fairness and transparency of the terms of four firms offering unregulated BNPL products.
“We identified potential harm to consumers and contacted the four firms with our concerns,” the FCA said in a statement. “This is in line with our strategy to act as an assertive regulator, by being proactive at the boundaries of the FCA perimeter where appropriate and has resulted in good outcomes for consumers in this sector.”
The FCA has asked four firms — Clearpay, Klarna, Laybuy and Openpay — to address its concerns about protecting customers.
These companies have cooperated, the agency said. They agreed to improve terms in their consumer contracts to make them fairer, easier for consumers to understand and to better reflect how they use them in practice.
Some of the BNPL firms have offered refunds to consumers who have in the past been charged late payment fees for instalments that were due after they cancelled their online sales purchase with the retailer, the FCA added.
Last month, PYMNTS reported BNPL transaction volume is expected to reach $680 billion worldwide by 2025. This suggests consumers will continue to embrace installment payments as they learn more about their benefits and seek ways to manage their finances.
See also: Who’s Using BNPL and Why?
Thirty-nine percent of consumers opted for BNPL to avoid credit card interest, 25% used it to borrow without having to agree to a credit check while another 16% used it simply because they do not like credit cards.
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