FCA secures changes to potentially unfair and unclear T&Cs of BNPL providers
Posted on in Business News, Cycles News, Political News
The
Financial Conduct Authority (FCA) secures changes to potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy and Openpay. The FCA was concerned there was a potential risk of harm to consumers as a result of the way some of the firm's terms were drafted.
The Woolard Review into change and innovation in the unsecured credit market found the use of Buy-Now Pay-Later (BNPL) products nearly quadrupled in 2020 to £2.7 billion. The Government plans to change the law to bring some of the current forms of unregulated buy-now-pay-later products into FCA regulation.
Even though the type of buy-now-pay-later agreements offered by these firms are not yet regulated, the FCA was able to use the Consumer Rights Act to assess the fairness and transparency of the terms.
As a result of the FCA's work, the firms are making terms on issues like contract cancellations and continuous payment authorities fairer and easier to understand. In addition, 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, 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, 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.'
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The ACT has previously raised concerns about the improper regulation of
BNPL providers and the risks that this brings to potential customers.
It may be worth having a recap of the ‘Avoid the pitfalls' mini-series that the ACT published to answer the trade's questions about selecting the most suitable retail finance provider.
Key topics examined are why low rates can equal lost sales, the importance of checking the finer details of your agreement and why you should identify who actually lends the money when selecting your provider.
Choosing a finance provider, avoid the pitfalls #1
Choosing a finance provider, avoid the pitfalls #2
Choosing a finance provider, avoid the pitfalls #3
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