FCA warns against misleading Buy Now Pay Later adverts

Regulator says it will use criminal and regulatory enforcement powers versus firms with non-compliant promotions

FCA warns against misleading Buy Now Pay Later adverts

The Financial Conduct Authority (FCA) has warned consumers who could be misled by Buy Now Pay Later (BNPL) financial promotions that do not comply with relevant promotion rules.

The regulator is concerned that some financial adverts on websites and social media, including posts by social media influencers, may breach FCA rules. It cited, as an example, adverts emphasising the benefits of BNPL products without fair and prominent warnings of any risks to customers.

These include 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, and information about when charges become payable.

The FCA reminded firms that offer BNPL products that although some agreements are unregulated, the financial promotions of all BNPL products must comply with financial promotion rules.

It added that unauthorised firms might be committing a criminal offence if they don’t have an FCA-authorised firm approve their financial promotions. Authorised firms selling unregulated or exempt BNPL products must still comply with the rules, unless an exemption applies.

“Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions. It is vital that adverts are clear, fair, and not misleading,” Sheldon Mills, executive director of consumers and competition at the Financial Conduct Authority, said.

Although the FCA does not yet regulate BNPL products, the financial regulator said it has been proactively addressing concerns about potential harm to consumers. It recently held a roundtable with BNPL providers to discuss upcoming regulation and called on firms to do more to support borrowers in financial difficulty, including signposting to money guidance and debt advice.

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 said it is continuing to engage with BNPL providers and is proactively monitoring the market to ensure expectations are met. It 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.