View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. News
February 15, 2022

UK’s FCA urges four BNPL firms to amend consumer contract terms

The Financial Conduct Authority (FCA) in the UK has ordered buy-now-pay-later (BNPL) firms Klarna, Clearpay, Laybuy and Openpay to make changes to their contract terms.

Free Report
img

What does the future hold for BNPL market?

The global Buy Now Pay Later (BNPL) market is estimated at a massive $120 million in 2021 – representing just less than 3% of the global ecommerce market. Yet the user-base is massive, with leading provider, Klarna, alone reportedly having 87 million users in 2021. This market is only expected to grow, with established companies like Apple and Goldman Sachs moving into the BNPL sector in bids to capitalize on this trend. To help you make the most of this growing market, GlobalData’s Buy Now Pay Later in 2022 and Beyond report provides detailed insight into the BNPL sector. This report:
  • Discusses the disruptive potential of the BNPL sector on the payments industry
  • Identifies the leading companies that are driving sector growth and the benefits this new payments solution provides to both merchants and consumers
  • Analyzes the consumer’s risk of using BNPL loans and government attempts at introducing regulations to the sector
  • Uncovers the main risks that consumers expose themselves to when borrowing with BNPL
Download this free report to get to know where this developing market is headed, and how you can reshape your strategies.
by GlobalData
Enter your details here to receive your free Report.

These firms were urged by the FCA to amend their consumer contracts after identifying a potential risk of harm to consumers because of the way some of the terms were drafted.

According to FCA, the new changes will help consumers better understand the cancellation of contract and continuous payment authorities, termination of accounts, as well as set-off terms.

BNPL firms, which allow consumers to make purchases in instalments, are not yet regulated by the FCA.

However, the watchdog said that it was able to use UK’s consumer rights laws to assess and secure changes to the ‘fairness and transparency’ of the terms.

FCA Consumers and Competition executive director 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.”

As part of the development, Clearpay, Laybuy and Openpay offered to voluntarily refund consumers who were previously inappropriately charged fixed late payment fees after they had cancelled the order with the retailer.

Klarna, which does not charge late payment fees, has no such refunds due to consumers.

Mills added: “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.”

Increasing regulatory crackdown in BNPL space

In December last year, the US Consumer Financial Protection Bureau launched an inquiry into BNPL credit following concerns about consumer risk.

As part of the inquiry, BNPL firms Affirm, Afterpay, Klarna, PayPal, and Zip were ordered by the agency to submit data on the risks and benefits of their services.

The same month, Reuters reported that Australia is planning to broaden its existing payment regulations to bring BNPL firms under the direct supervision of regulators.

Free Report
img

What does the future hold for BNPL market?

The global Buy Now Pay Later (BNPL) market is estimated at a massive $120 million in 2021 – representing just less than 3% of the global ecommerce market. Yet the user-base is massive, with leading provider, Klarna, alone reportedly having 87 million users in 2021. This market is only expected to grow, with established companies like Apple and Goldman Sachs moving into the BNPL sector in bids to capitalize on this trend. To help you make the most of this growing market, GlobalData’s Buy Now Pay Later in 2022 and Beyond report provides detailed insight into the BNPL sector. This report:
  • Discusses the disruptive potential of the BNPL sector on the payments industry
  • Identifies the leading companies that are driving sector growth and the benefits this new payments solution provides to both merchants and consumers
  • Analyzes the consumer’s risk of using BNPL loans and government attempts at introducing regulations to the sector
  • Uncovers the main risks that consumers expose themselves to when borrowing with BNPL
Download this free report to get to know where this developing market is headed, and how you can reshape your strategies.
by GlobalData
Enter your details here to receive your free Report.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Electronic Payments International