FCA warns Buy Now Pay Later firms about advert compliance
The UK Financial Conduct Authority (FCA) today issued a warning to Buy Now Pay Later firms about misleading adverts.
The regulator explains that although some agreements are unregulated the financial promotions of all BNPL products must comply with the financial promotion rules. Unauthorised firms might be committing a criminal offence if they do not have an FCA-authorised firm approve their financial promotions.
Authorised firms selling unregulated or exempt BNPL products must comply with the relevant rules unless an exemption applies. This includes that their BNPL financial promotions must be clear, fair and not misleading.
The FCA is concerned consumers could be misled if BNPL financial promotions do not comply and has seen financial adverts on websites and social media, including posts by social media influencers, which may breach FCA rules. For example, adverts emphasising the benefits of BNPL products without fair and prominent warnings of any risks to customers, such as:
- the risk of taking on debt that customers cannot afford to repay
- the consequences of missed payments
- any other adverse consequences such as the impact on the customer’s credit file
- information about when charges become payable
Earlier this year the FCA worked with BNPL firms to secure changes to potentially unfair and unclear terms in BNPL contracts using powers under the Consumer Rights Act.
The FCA is continuing to engage with BNPL providers and are proactively monitoring the market to ensure expectations are met. The regulator has confirmed it will use criminal and regulatory enforcement powers if it sees promotions that do not comply. So far this year, FCA action against firms that have breached its rules have led to 4,226 promotions being changed or withdrawn.