FCA warns on BNPL boom
The City regulator has aired its concerns around a rise in the use of buy-now-pay-later (BNPL) products.
According to a new survey by the Financial Conduct Authority (FCA), more than a quarter (27 per cent) of UK adults used BNPL at least once in the six months prior to January 2023. This is up from 17 per cent in the preceding 12 months in May 2022.
The FCA also found that frequent users of BNPL are more likely to be in financial difficulty. People who used BNPL more than 10 times in the last 12 months were more than twice as likely as those who have not used BNPL to also have a high-cost credit product.
Read more: Low cost of credit will drive BNPL boom
They were almost twice as likely to have increased the amount of debt on credit products over the last year. And they were more than four times as likely to have missed a payment of a bill or credit commitment in three of the last six months.
“Our research shows a significant increase in the use of BNPL over the past year,” said Sheldon Mills (pictured) executive director of consumers and competition at the FCA.
“When used appropriately, the product provides valuable benefits, but we want to ensure that consumers, particularly those in vulnerable circumstances, have adequate protections and are given sufficient information.”
Read more: Industry welcomes new BNPL regulation
The FCA revealed that it recently secured further changes to “potentially unfair and unclear contract terms for unregulated BNPL firms.”
The regulator used its powers under the Consumer Rights Act 2015 to push PayPal and QVC to make it easier for consumers to understand their payment terms. Both firms voluntarily made these changes, with PayPal also making terms relating to what happens when a consumer cancels the purchase funded by the loan clearer and fairer.
Read more: Government tells BNPL lenders to ensure loan affordability