Relying on the Consumer Rights Act 2015, the FCA identified a number of terms in the four companies' consumer contracts which left room to cause consumer harm:
- Terms that could lead to consumers continuing to pay instalments after cancelling their contract, or being wrongly charged late payment fees after the agreement should have been terminated.
- The far-reaching ability for BNPL firms to freeze or cancel consumers' accounts without notice.
- Terms which appeared to exclude consumers' set off rights, which allow consumers to deduct money that the firm owes them from their debt.
- A lack of clarity in relation to how consumers could cancel their continuous payment authority, which allows firms to regularly take money from consumers' bank accounts.
All four firms co-operated and have agreed to amend their consumer contracts to address FCA's concerns, with some also agreeing to provide compensation and to refund late payment fees that were wrongly charged. Despite the apparent amicable agreement made, this assertive intervention from the FCA is a clear warning to BNPL firms that although currently unregulated, they are still subject to consumer rights law and must be mindful of potential consumer harm. Given the growth in popularity of BNPL products, this action has been welcomed by many consumer rights groups. And indeed, it has provided further evidence that backs calls for BNPL schemes to fall under the FCA's regulatory scope. An FCA consultation paper is expected shortly on plans to bring this type of short term credit product into requlation under the Consumer Credit Act regime. This follows an earlier consultation by HM Treasury on the same subject: see here for an earlier blog on that consultation.
