BNPL firms warned about financial promotions

Buy Now Pay Later (BNPL) firms are being warned by the FCA that all financial promotions of their products must comply with the regulator’s financial promotion rules.

Unauthorised firms could 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 comply with the relevant rules, unless an exemption applies.

The FCA has expressed concern that consumers could be misled if BNPL financial promotions do not comply with its rules, and has reported that some financial adverts on websites and social media, including posts by social media influencers, which may breach FCA rules.

This included 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  , or information about when charges become payable.

Executive director of consumers and competition at the FCA, said: “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.

“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.”

Although the FCA does not yet regulate BNPL products it has been proactively addressing concerns about potential harms to consumers. The regulator 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.

The FCA also confirmed it will use criminal and regulatory enforcement powers if it sees promotions that do not comply. FCA action against firms that have breached its rules have resulted in 4,226 promotions being changed or withdrawn so far this year.

Senior personal finance analyst at Hargreaves Lansdown, Sarah Coles, added: “Social media influencers flogging BNPL loans may be encouraging people to take on debts they don’t understand. At a time when rising prices have pushed so many people’s finances to the edge, piling up unaffordable levels of debt risks pushing them into the abyss. The financial watchdog has issued a warning to social media influencers and firms about the dangers of breaking the rules around advertising these products.

“With so many people under intolerable financial pressure, there’s a risk that more of them hunt for any way to make ends meet. BNPL seems like a cost-free solution, but if people don’t understand what they’re getting into, they could rack up unaffordable debts and face serious consequences.

“Clearer promotions should help people to fully appreciate what they’re getting into, but it’s worth thinking carefully before you take on any extra debt.”

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