FCA locks in changes to BNPL terms to cut consumer risk

The Financial Conduct Authority (FCA) has secured changes to potentially damaging terms in the contracts providing by a select number of buy now, pay later (BNPL) firms.

The authority had the changes made from hazy terms in the contracts of Clearpay, Openpay, Laybuy and Klarna and was concerned there was a possible risk of harm to consumers as a result of the way some of the company’s terms were drafted.

The recent Woolard Review will result in the UK government changing the law to bring some of the current forms of unregulated BNPL products into FCA regulation. While the kind of BNPL agreements offered by the above companies are not regulated yet, the FCA was able to use the Consumer Rights Act to assess the fairness and transparency of the terms.

Due to the work undertaken by the FCA, the four BNPLs are making terms on issues like contract cancellations and continuous payment authorities fairer and easier to understand. Furthermore, one of the terms that involved late payment fees has led to Clearpay Laybuy, and Openpay agreeing to voluntarily refund customers who have been charged late payment fees in specific circumstances.

FCA executive director of consumers and competition Sheldon Mills 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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