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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forced 4,226 promotions to be withdrawn or amended this year.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 and Openpay 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.
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)
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