FCA reportedly threatens BNPL firms against financial promotion “loophole”

According to City A.M., it explained they could face up to two years in jail if they fail to fall in line with the promotion rules, as it’s using a loophole to clamp down on the products despite not directly regulating them.  

In a letter, it warned some BNPL bosses and retailers that any communication or “explainers” on BNPL products constitute “financial promotions”, and therefore fall within its jurisdiction. This follows a warning sent out by the FCA in August telling firms in the sector that their promotions should be “clear, fair and not misleading”.  

City A.M. has said industry insiders have hit back at the move, claiming the watchdog has stretched the definition of financial promotion and is choking off BNPL firms’ revenue. A senior source from one of these businesses told the outlet they are now facing a “horrific” run-up to Black Friday and Christmas.  

They explained: “The FCA has identified what can only be described as a loophole to try to enforce regulation on the sector. And that loophole is an incredibly broad definition of what a financial promotion is.  

“The FCA appears to have taken the position that any information that explains how the product works is a financial promotion and therefore needs to go through a regulated sign-off process.”  

Explaining its position, a spokesperson for the regulator told City A.M.: “If content on a webpage is causing a consumer to engage it is likely to be a financial promotion and would need to be issued or approved by an authorised firm. It is vital that all financial promotions are clear, fair and not misleading.”