finance news

UK: Top BNPL firms change their contract terms after FCA intervention

UK: Top BNPL firms change their contract terms after FCA intervention
UK: Top BNPL firms change their contract terms after FCA intervention

Four major buy now, pay later (BNPL) companies in the UK have reportedly agreed on changing their ‘potentially’ unfair and unclear terms and conditions after intervention from the UK Financial Conduct Authority (FCA).

The financial regulator stated that the companies, Openpay, Klarna, Clearpay, and Laybuy, have to change contracts terms about cancellations and continuous payment authority to be fairer and easier to understand.

The four have also agreed on refunding some late payment fees that customers were wrongly charged for their canceled orders.

The FCA, which was able to enforce the changes with the help of consumer law, admitted that it still lacked the powers needed for regulating the sector, unlike it has over other consumer credit companies.

In a review last year, FCA found that the BNPL market in the UK had tripled in size in just 2020, while other short-term consumer credit forms, like payday lending, shrunk after having to improve their consumer protections.

Consultancy firm Bain & Company estimates that the market’s annual worth is around 6.4 billion ($8.7 billion) in the UK, and is used by almost 10 million shoppers.

Stella Creasy, Labour MP of Walthamstow, had criticized FCA’s approach in targeting BNPL firms and called for urgent regulation of the firms in the country in November last year.

Creasy stated that these firms are the latest means for ‘legal loansharking’, wherein consumers were being encouraged to get into a habit of borrowing money that they would not be able to repay, adding that the biggest problem was the charging of interest to customers.

BNPL services allow consumers to pay for the goods they want to buy via installments and do not charge interest on loans, avoiding current regulations on credit cards and payday lenders.

All four firms have stated that they welcomed the intervention and were committed to having fair and transparent terms with proportionate regulations.

Sheldon Mills, Executive Director of Consumers and Competition, FCA, stated that the regulatory body has made sure that the BNPL industry implements high standards in its terms and conditions of consumer contracts and hopes other firms also make the changes voluntary, like the four firms.

Source credit: https://www.theguardian.com/business/2022/feb/14/four-buy-now-pay-later-firms-change-potentially-unfair-terms-clearpay-klarna-laybuy-openpay

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