Three buy now/pay later lenders that operate in the U.K. have refunded late-fee charges to consumers following a review by the country's Financial Conduct Authority, which is seeking to expand its jurisdiction over the fast-growing and unregulated domestic BNPL industry.
The moves came after the U.K.’s financial regulator ordered Klarna, Openpay, Clearpay and Laybuy to clarify terms in their contracts to protect consumers, the FCA said Monday.
Openpay, Clearpay and Laybuy subsequently agreed to refund late-fee charges for buy now/pay later customers who canceled their entire purchases, the FCA said.
The U.K. government plans to change its laws so that BNPL loans will officially fall under the FCA’s authority, according to the regulator, but no timetable has been set for that change.
“We do not yet have powers to regulate these firms, but we do have powers to review the terms and conditions of consumer contracts for fairness,” said Sheldon Mills, the FCA’s executive director of consumers and competition, said in a press release.
The FCA’s new guidance is based on an industry review the agency conducted and released this month, which also concluded that its regulatory powers should be extended to the BNPL industry in response to its rapid growth in the past few years, the agency said.
Barclays UK on Monday separately released the results of research suggesting that nearly half of U.K. BNPL borrowers, or 47%, owe money to more than one BNPL provider.
Among consumers with multiple outstanding BNPL loans, 60% owe money on three or more concurrent BNPL loans, according to Barclays’ survey.
Thirty-five percent of BNPL users in the U.K. said they signed up for a BNPL loan because they lacked any other available cash for purchases, and 10% said they opted for a BNPL loan because their other credit applications were rejected, Barclays’ survey said.
Nearly one in four young adults said they’ve reduced their spending on essential items like groceries to keep up with BNPL loan repayments, and 18% said their credit score has been negatively affected by outstanding BNPL loans, according to the survey.
The survey was conducted among 2,000 U.K. consumers Feb. 1-4 by Opinium on behalf of Barclays.
