Huw Jones

LONDON (Reuters). The Financial Watchdog of Britain said Monday it had instructed four BNPL (buy now, pay later) firms to modify their contracts. It did this after recognizing “potential damages” for consumers.

Unregulated BNPL companies offer short-term, interest-free loans with spread payments that cover retail goods such as clothing.

The market grew more than three times to 2.7 billion pounds in 2020 ($3.65 trillion), as COVID-19 lockdowns led to more people trying to survive.

Clearpay, Klarna Laybuy, Openpay and Clearpay have all cooperated fully with us. The Financial Conduct Authority released a statement expressing gratitude for their cooperation as well as their efforts to resolve our concerns.

Although it could not regulate BNPL businesses, the watchdog claimed that it could use Britain’s Consumer Rights laws to improve their contracts, make them easier to read and reflect what they do in practice.

Klarna claimed that the FCA had implemented its proposed changes.

Alex Marsh from Klarna UK stated that while we’ve never had a complaint about terms or conditions specifically, customers are still open to improvements.

This watchdog stated that every firm in the sector should adhere to all consumer protection laws.

Clearpay, Laybuy, and Openpay have agreed to refund any customers that were charged late payment fees under certain circumstances.

Clearpay, Laybuy, and Openpay didn’t immediately reply to our requests for comment.

A review by former FCA acting CEO Christopher Woolard in February 2021 said BNPL can pose potential consumer harms https://www.fca.org.uk/publication/corporate/woolard-review-report.pdf that need to be addressed as soon as possible.

The British finance ministry has promised that legislation will be introduced to regulate BNPL once parliamentary time permits.

StepChange is a charity that helps people deal with their debts. The FCA intervention did not replace regulation of the sector to make it conform to the watchdog’s rules.

After the government had decided on which activities and firms to regulate, the FCA stated that it would consult with them about rules regarding BNPL.

($1 = 0.7400 pounds)