Cost-of-living crisis prompts 'buy now, pay later' warning from UK's FCA (updated)

Openpay

19/08/2022 11:53

(Adds detail, size of market, Klarna comment)
    By Huw Jones
    LONDON, Aug 19 (Reuters) - People responsible for misleading
'buy now, pay later' adverts could face two years in prison,
Britain's financial watchdog warned on Friday as it told firms
offering the loans to stop encouraging "impulse buying" and
spell out late repayment fees.
    As Britain's cost-of-living crisis worsens, the Financial
Conduct Authority has told so-called BNPL firms and the British
Retail Consortium that the benefits of the on-the-spot,
interest-free, short-term loans were being emphasised in adverts
without fair and prominent indications of any relevant risks.
    While BNPL loans, which spread repayments on goods such as
clothes over a few weeks, are unregulated in Britain, the FCA
has powers to intervene in how they are advertised and has
forced 4,226 promotions to be withdrawn or amended this year.
    Money is becoming tighter for many Britons who face soaring
energy costs and 40-year high inflation pushing up food prices,
making BNPL products an option in a financial squeeze.
    "As we face a cost-of-living crisis, consumers are having to
make difficult decisions about their finances and how they pay
for goods and services," said Sheldon Mills, the FCA's executive
director of consumers and competition.
    BNPL lenders make money by taking a cut from what they help
retailers sell, with some banks recently joining the rush to
serve customers who would normally be unable to get a credit
card or would fail strict credit checks.
    Some BNPL lenders charge late payment fees, and a failure to
pay can also hit consumers' credit ratings.
    The FCA, which did not single out any lender on Friday, 
told BNPL operators Clearpay, Klarna, Laybuy  LBY.AX  and
Openpay  OPY.AX  in February to change their contracts after
identifying potential harm to customers. 
    It had to use consumer rights law to do so and Britain is to
hold a public consultation on draft legislation to introduce
BNPL affordability checks. urn:newsml:reuters.com:*:nL1N2Y70G8 urn:newsml:reuters.com:*:nL8N2UP241
    Klarna said on Friday its adverts comply with FCA rules and
it makes clear the consequences of missed payments.
    "We continue to call for proportionate regulation of the
sector so consumers are protected regardless of the provider
they choose," a Klarna spokesperson said.
    Bain & Co said in a report last year that BNPL transactions
were worth 5% of Britain's e-commerce market, or 6.5 billion
pounds, in 2020 with annual growth rates of 60% to 70%.
    The FCA said it would use criminal and regulatory
enforcement powers against breaches of rules that an
FCA-authorised firm must approve all financial promotions.

 (Reporting by Huw Jones; Editing by Jan Harvey and Alexander
Smith)
 ((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters
Messaging: huw.jones.thomsonreuters.com@reuters.net))