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FCA warns BNPL firms against “misleading” adverts

Some BNPL providers may be “taking advantage of behavioural biases “ hindering effective consumer decision-making and encouraging impulse buying, according to the Financial Conduct Authority.

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The UK’s financial regulator the Financial Conduct Authority has issued a warning to ‘buy now, pay later’ providers against misleading adverts, suggesting non-compliance could result in criminal charges being brought against individuals. 

The FCA does not yet regulate BNPL but it has been increasingly vocal about the sector and the need to bring products within the scope of its powers owing to concerns about potential harms to consumers.

In a ‘Dear CEO letter’ sent today Sheldon Mills, executive director of consumers and competition at the FCA, says the regulator is concerned that marketing campaigns are breaching rules, despite BNPL lending currently sitting outside of regulation. 

“We have seen financial promotions on websites and social media, including posts by social media influencers, which may breach the requirements set out in CONC 3 by failing to be balanced,” the letter said. 

“The benefits of BNPL products have been emphasised without fair and prominent indications of any relevant risks to customers,” it added. 

More specifically these include the risks of taking on debt that customers cannot afford to repay,  the consequences of missed payments and  information about when charges become payable 

“Taking advantage of behavioural biases also hinders effective consumer decision making, and we are concerned BNPL promotions may be encouraging impulse buying” it said. 

The FCA says it will be proactively monitoring the BNPL market’s compliance with its warning that promotions must comply with guidelines and be approved by an authorised firm, we will consider what further action may be appropriate.

“As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services,” said Mills in a separate press statement.

“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,” Mills added.

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