FCA secures contract changes for BNPL customers

The FCA was concerned there was a risk of harm to consumers as a result of the way some of their terms were drafted.

It comes off the back of the Woolard Review, which investigated the change and innovation in the unsecured credit market and found the use of buy now, pay later (BNPL) products nearly quadrupled in 2020 to £2.7bn. The government now plans to change the law to bring some of the current forms of unregulated BNPL products into FCA regulation. 

And even though the type of BNPL 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 regulator’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. 

Commenting on the news, the FCA’s executive director of consumers and competition Sheldon Mills, said: “BNPL 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.”