The UK’s financial regulator has written to providers of Buy Now Pay Later (BNPL) products and the British Retail Consortium warning about unregulated promotions.
The Financial Conduct Authority outlined that products must comply with promotion rules, and some unauthorised firms may be breaking the law if their products aren’t backed up by an approved company.
With the cost of living crisis and soaring inflation putting pressure on people’s wallets and savings, some may consider turning to short-term loans or BNPL schemes to make ends meet.
This comes after Tory leadership frontrunner Liz Truss said she is planning an immediate shakeup of the City’s major regulators if she wins the race to become prime minister.
Truss is planning to merge the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and Payments System Regulator (PSR) into a single, new body.
“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”, said Sheldon Mills, executive director of consumers and competition at the FCA.
“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.”
Among rules the FCA said firms must comply with are ensuring promotions are clear, fair and not misleading, amid concerns consumers could buy products which are from unregulated sources, including social media influencers and on facebook.
Other risks it says must be made clear, are the problems of taking on debt a customer cannot afford to pay, the consequence of missed payments and the impact on credit ratings.
The FCA does not regulate BNPL products but it has addressed concerns about harms to consumers from firms providing them.