Regulator the Financial Conduct Authority (FCA) has used the Consumer Rights Act 2015 to assess the fairness and transparency of the terms of four firms offering unregulated Buy Now Pay Later (BNPL) products and identified potential harm to consumers.
This is in line with its strategy to act as an assertive regulator, by being proactive at the boundaries of the FCA perimeter where appropriate. As a result of this work, the firms (Clearpay, Klarna, Laybuy and Openpay) have agreed to change terms in their consumer contracts to make them fairer, easier for consumers to understand and to better reflect how they use them in practice.
BNPL is a broad term and covers a variety of credit agreements, typically used to spread the cost of purchases. In recent years, more consumers have used BNPL products, particularly for online purchases. Not all BNPL products are regulated by the FCA under consumer credit regulation. Unregulated BNPL credit agreements rely on the exemption found in Article 60F(2) of the Regulated Activities Order (RAO). However, all firms must comply with consumer protection legislation, which the FCA has powers to enforce. The Government intends for these products to be regulated by the FCA in future.