FCA secures contract changes for growing BNPL customer population
Summary
New research from the FCA shows that there has been a significant increase in the use of buy-now-pay-later (BNPL). The news comes as the FCA secured further changes to potentially unfair and unclear contract terms for unregulated BNPL firms.
The data, which comes from the FCA’s Financial Lives research, shows that 27% of UK adults (around 14 million people) have used BNPL at least once in the six months to January 2023, up from 17% in the preceding 12 months.
The research also found that frequent users of BNPL are more likely to be in financial difficulty.
Consumers who have used BNPL more than 10 times were:
• More than twice as likely as those not using BNPL to hold a high-cost credit product (48% v. 22%)
• Almost twice as likely to have increased their credit product debt over the last year (51% v. 27%)
• Four times more likely to have missed a payment in three of the last six months (27% v. 6%).
While the FCA does not have regulatory oversight over BNPL products, it says it is determined to protect consumers using financial services where it can.
The regulator has used its powers under the Consumer Rights Act 2015 to secure changes to potentially unfair and unclear contract terms in this sector, building on its work with other BNPL providers last year and guidance issued at the time.
The FCA previously flagged concerns that PayPal and QVC customers were at risk of harm because of the way in which some contract terms were drafted. Since then, both firms have voluntarily made their continuous payment authority terms easier to understand. PayPal has also made its terms around what happens when a consumer cancels a loan-funded purchase both clearer and fairer.
The FCA has reminded all firms to ensure that their consumer contracts comply with all requirements of consumer protection legislation that apply to their business.