FCA has secured voluntary agreement from Clearpay, Klarna, Laybuy and Openpay to make changes to terms in their contracts. Although FCA does not yet regulate the contracts, it used its powers under the Consumer Rights Act to challenge terms it felt were potentially unfair and unclear and which led to the potential risk of harm to consumers.
FCA’s main concerns were around terms on contract cancellations and continuous payment authorities, but all firms except Klarna (which does not charge late payment fees) have also agreed to refund customers who had been charged late payment fees under another unclear term.
The terms that concerned FCA were:
- terms that required consumers who returned goods funded by BNPL to continue to pay off the loan until the lender received confirmation from the retailer that the goods had been returned or a refund from the retailer. FCA was concerned that the agreement, which should have terminated when the customer returned all the goods, may not have always done so, and as a result, consumers may have continued to pay when they did not need to, or been charged late payment fees for not paying instalments that should not have been due (for instance, because the retailer had delayed in notifying the lender)
- terms that read as if they would terminate or suspend a consumer’s account at no notice for any reason;
- terms that appeared to inappropriately exclude a right a consumer may have had to set off; and
- terms that did not make it clear how a consumer could cancel a CPA.
FCA has reminded firms of matters they should consider in their terms, not least the consumer rights to cancel under the Consumer Contracts (Information, Cancellation and Additional Charges Regulations 2013, and more generally the requirements of the CRA..