Making Buy Now Pay Later terms clearer and fairer

We reviewed the contracts of Buy Now Pay Later (BNPL) firms and took assertive action to make terms fairer and clearer for consumers. 

Buy Now Pay Later (BNPL) covers a wide range of credit agreements, generally used by consumers to spread the cost of purchases.

The Woolard Review into the unsecured credit market found the use of BNPL products nearly quadrupled in 2020 to £2.7 billion.

We don’t currently regulate all BNPL products, but the Government intends for us to do so in the future. Before that happens, all firms must comply with consumer protection legislation, which we're able to enforce.   

We found potential harm to consumers

Because we had some concerns about BNPL, we looked at the terms and conditions in the contracts of four of the largest providers in this field. We found potential harm to consumers in the contracts of Clearpay, Klarna, Laybuy and Openpay.

Problems included:

  • contract cancellation terms, including late payment fees (in certain circumstances)
  • the firms’ ability to terminate or suspend accounts
  • continuous payment authority terms
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Setting guidance for BNPL firms

We contacted the four firms, who fully cooperated and changed their terms to make them fairer and easier for consumers to understand. Clearpay, Laybuy and Openpay also agreed to voluntarily refund customers that had been charged late payment fees in certain circumstances.

We then published details of the changes these firms had made, and guidance for other BNPL firms in the sector to remind them of their obligations.  

StepChange, Citizens Advice and Money Advice Trust all welcomed our action.

While this case is at the edge of our remit as a regulator, it shows that, in some cases, we can deliver positive change by being proactive and getting involved early.