The Financial Conduct Authority is cracking down on potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy and Openpay ahead up-and-coming regulation of the UK buy now, pay later market.
Even though the type of buy-now-pay-later agreements offered are not yet regulated, the FCA was able to use the Consumer Rights Act to assess the fairness and transparency of the terms.
As a result, the firms are making terms on issues like contract cancellations and continuous payment authorities fairer and easier to understand. In addition, one of the terms that involved late payment fees has resulted in Clearpay, Laybuy, and Openpay agreeing to voluntarily refund customers who have been charged late payment fees in specific circumstances.
The refunds will be paid where a customer has cancelled their entire order but have been charged a late payment fee for a loan repayment after the loan should have been cancelled. The FCA says people who believe they have been subject to similar charges shoud contact their provider to demand a refund.
Sheldon Mills, executive director of consumers and competition at the FCA, says: “We do not yet have powers to regulate these firms, but we do have powers to review the terms and conditions of consumer contracts for fairness, and have acted proactively to ensure that the BNPL industry adopts high standards in their terms and conditions.
“The four BNPL firms we have worked with have all voluntarily agreed to change their approach. We welcome this and hope that the rest of the industry will now follow.”