Four buy now, pay later firms change ‘potentially unfair terms’
The major buy now, pay later companies Clearpay, Klarna, Laybuy and Openpay have agreed to change “potentially unfair and unclear” terms and conditions after an intervention from the financial regulator.
The Financial Conduct Authority (FCA) said it was able to use consumer law to enforce the changes. However, the regulator acknowledged that it was still lacking the powers to regulate the sector to the same standard as other consumer credit companies.
The companies were made to change contract terms on cancellations and continuous payment authority to make them “fairer and easier to understand”, the FCA said. Clearpay, Laybuy and Openpay also agreed to refund some late payment fees they had wrongly charged after customers cancelled orders.
The use of buy now, pay later (BNPL) has exploded in recent years, with an FCA review last year finding that the UK market had trebled in size in 2020 alone, even as other forms of short-term consumer credit such as payday lending fell back after being forced to improve their consumer protections. The market is worth an estimated £6.4bn a year in the UK, according to the consultancy firm Bain & Company, and is used by about 10 million shoppers.
The government is considering bringing in new rules for the sector but has yet to detail what action it will take.
BNPL services are usually offered at the point of sale online, allowing shoppers to pay in instalments. Unlike payday lenders or credit cards, BNPL lenders typically do not charge interest on loans, meaning they avoid current regulations. Retailers instead pay the companies fees.
The rapid growth – and the prospect of lending platforms spreading to retailers around the globe – has helped BNPL companies to huge valuations usually enjoyed
Read more on theguardian.com
