On 19 August 2022, the Financial Conduct Authority (FCA) published a press release warning Buy Now Pay Later firms about misleading adverts.

The FCA has warned firms that offer Buy Now Pay Later (BNPL) products that although some agreements are unregulated, the financial promotions of all BNPL products must comply with the financial promotion rules. Authorised firms selling unregulated or exempt BNPL products must comply with the relevant rules unless an exemption applies. This includes that their BNPL financial promotions must be clear, fair and not misleading.

The FCA is concerned consumers could be misled if BNPL financial promotions do not comply and has seen financial adverts on websites and social media which may breach FCA rules. For example, adverts emphasising the benefits of BNPL products without fair and prominent warnings of any risks to customers such as:

  • 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.
  • Information about when charges become payable.

Although the FCA does not yet regulate BNPL products it has been proactively addressing concerns about potential harms to customers. For example, the FCA recently held a round table with BNPL providers to discuss upcoming regulation. Additionally, 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 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 So far this year, FCA action against firms that have breached its rules has led to 4,226 promotions being changed or withdrawn.

The FCA has also issued a Dear CEO letter to BNPL providers setting out its concerns. The FCA expects the boards of BNPL providers to consider the issues raised in the letter and approve the action taken in response.