UK Regulator Drives Changes to Terms of Buy Now, Pay Later Firms

The U.K. Financial Conduct Authority has secured changes to the contracts of four Buy Now, Pay Later firms – Clearypay, Klarna, Laybuy and Openpay. Certain terms, including contract cancellations, continuous payment authorities and right of set-off terms, will be made fairer and easier to understand. This was done under the FCA's powers as an unfair terms regulator under the Consumer Rights Act 2015 to ensure that firms comply with consumer protection legislation. Clearpay, Laybuy and Openpay have also offered voluntarily to refund customers who were inappropriately charged late payment fees (Klarna does not charge late payment fees so no refunds were due). 

Buy Now, Pay Later firms offer customers the opportunity to obtain an asset they cannot currently afford via a loan to spread the cost of purchases into the future. Although not all Buy Now, Pay Later products are regulated by the FCA for consumer credit purposes, firms offering these products are obliged to comply with consumer protection legislation and the FCA has powers to enforce that legislation. Many firms offer their services for online purchases and the U.K. government intends for these products to be regulated in future.

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