FCA warns businesses to buy now, pay later against misleading ads


Britain’s financial regulator has warned companies that offer buy now, pay later products against using misleading adverts, saying they must comply with financial promotion rules.

“Unauthorized firms could commit a criminal offense if they fail to have their financial promotions approved by an FCA-licensed firm,” the Financial Conduct Authority said on Friday.

“Authorized businesses selling unregulated or exempt BNPL products must comply with applicable rules, unless an exemption applies. This includes that their BNPL financial promotions must be clear, fair and not misleading.

The statement highlights growing concerns facing the growing consumer finance sector popularized by companies such as Sweden’s Klarna, formerly Europe’s most valuable private fintech group.

Buy now, pay later allows users to defer or split payments into installments, without charging interest if payments are made on time. Some companies have also waived late fees in the UK, including Klarna.

The FCA said it saw advertisements, including posts by social media influencers, that promoted short-term credit without warning of risks, such as unaffordable debt and the consequences of missed payments.

The sector benefited from the e-commerce boom at the start of the pandemic, but there are questions about the extent to which providers are ensuring that customers can afford the loans they offer and whether they are encouraging wasteful spending.

These fears have been exacerbated by the cost of living crisis. According to a survey commissioned by debt advice charity StepChange, half of those who buy now and repay loans later in the UK are struggling to cope with household bills and loan repayments, compared to half of those who buy now and repay loans later in the UK. general average of 30%.

“Businesses need to ensure that consumers, especially those in vulnerable circumstances, have the right information at the right time, so they can make effective, timely and properly informed decisions,” said Sheldon Mills. , FCA’s Executive Director of Consumers and Competition.

Regulators have previously criticized provider advertising. In December 2020, the Advertising Standards Agency banned several of Klarna’s advertisements on the grounds that they “irresponsibly encouraged the use of credit to improve people’s moods” and introduced guidelines requiring all providers to state that BNPL is a type of debt.

Klarna said it has actively and significantly changed its influencer and advertising policy and invested in KlarnaSense, a product designed to encourage responsible spending.

The ASA has also tightened its stance on the financial sector more generally. This year, the advertising watchdog warned HSBC against using advertisements to whitewash its reputation.

Buy now, pay later is currently unregulated in the UK. In June, the government presented its plans for regulating the sector, which would include tightening financial promotion rules.

However, new rules are not expected to come into force until 2023 at the earliest.

The FCA this month published tougher rules for the marketing of ‘high risk’ investments – such as peer-to-peer loans and private company shares – responding to what the regulator sees as a wave of risk-taking. by consumers following the Covid-19 pandemic.

It is also expected to take over control of advertisements for cryptocurrencies, after the Treasury said in January that it would pass new legislation to place crypto advertisements under the financial watchdog’s remit.


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