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FCA’s changes to Buy Now Pay Later come into force

As part of its ongoing oversight of consumer finance, the FCA has now implemented its new rules for BNPL.

  • Lenders must provide prompts to remind consumers when the deferral period is about to end. This is to ensure that they are more likely to repay the credit before they incur interest.
  • Customers should be provided with balanced information at the pre-contract stage, in particular how interest will be backdated and the benefits and risks of the product. This is the responsibility of the credit broker or the lender.
  • Backdated interest cannot be charged on any amount repaid by the customer during the BNPL offer period.

New guidance on advertising

In addition, the FCA has issued new guidance on advertising BNPL.  They now expect firms to provide better information to consumers about BNPL to ensure it is balanced and appropriately reflects the risks as well as the benefits.

To achieve this, it’s likely that representative examples need to be included within BNPL promotions.

This is currently only guidance, there’s been no change to the Consumer Credit Advertising Regulations.  Adding representative examples can be beneficial to customers, it helps them to understand how BNPL works and to be more informed about the impact of not repaying within the loan within the deferral period.

We would suggest that representative examples are added wherever practicable, especially on websites, leaflets and brochures.

Buy Now Pay Later will continue to be a leading finance option

BNPL is a well-established and highly effective ‘soft-sell’ marketing message that’s proven to generate more leads, close sales and enable businesses to up-sell.  It will remain the ‘go to’ finance option for customers looking to buy today, locking in the purchase price, while deferring repayment for up to 12 months.

December 12, 2019 - Consumer Credit Regulation

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