The payment company and television shopping channel revised their terms and conditions following intervention by the financial regulator
The financial regulatory authority in the city has taken steps after uncovering that customers of two prominent “buy now, pay later” providers were exposed to potential harm due to unclear and potentially unfair terms and conditions.
In response to expressed “concerns” by the Financial Conduct Authority (FCA) regarding the impact on their customers, both the US-based online payments group, PayPal, and the television shopping channel, QVC, have amended their contract terms.
These actions occurred alongside recent data that revealed a significant increase in the number of people in the UK embracing “buy now, pay later” services amid the cost of living challenges. This has led campaigners to renew their calls for comprehensive regulation of this multi-billion-pound industry.
“Buy now, pay later” (BNPL) enables online shoppers to spread out their payments and has experienced rapid expansion in recent years. However, it has faced allegations of pushing individuals into debt.
Typically, the expense is divided into weekly, bi-weekly, or monthly payments, and lenders typically generate income through commissions from retailers.
Although the FCA does not currently hold formal regulatory authority over the BNPL sector, it possesses certain intervention powers and has disclosed that it has taken steps to bring about adjustments in certain contract terms that were deemed “potentially unfair and unclear.”
The FCA revealed that PayPal and QVC had voluntarily enhanced the clarity of their “continuous payment authority” terms, and PayPal had made its terms regarding the course of action when a consumer cancels a purchase funded by the loan more transparent and equitable.
A continuous payment authority involves an individual granting a company permission to initiate one or more payments from their debit or credit card.
Although the FCA lacks regulatory oversight over BNPL products, a spokesperson emphasized its commitment to safeguarding consumers using financial services wherever it has the ability to do so.
The financial watchdog reported a “significant increase” in the utilization of BNPL, with 27% of UK adults, equating to roughly 14 million individuals, resorting to it at least once in the six months leading up to January of this year. This marked an increase from the 17% who reported using it in the previous 12 months as of May 2022.
The study also revealed that individuals who frequently use BNPL services were “more likely to be facing financial difficulties.”
A spokesperson from PayPal stated that the company had taken voluntary steps in July 2023 to modify a couple of the legal terms and conditions associated with its BNPL service, “PayPal Pay in 3.” They mentioned close collaboration with the regulator on these matters and indicated that an agreement had been reached. This agreement will offer greater clarity to customers who had previously availed themselves of Pay in 3 loans under the previous terms.
The spokesperson further emphasized PayPal’s dedication to treating its customers fairly and adhering to its regulatory responsibilities, asserting the company’s commitment to full compliance with all relevant laws and regulations.
