Following regulatory intervention, the payment company and shopping channel amended their terms and conditions
The financial regulatory authority in the city intervened upon discovering potential harm to customers of two major “buy now, pay later” providers due to unclear and potentially unfair terms. In response to expressed “concerns” from the Financial Conduct Authority (FCA) regarding their impact on customers, both PayPal, the US-based online payments group, and QVC, the television shopping channel, have adjusted their contract terms.
These actions coincide with recent data revealing a significant uptick in UK residents embracing “buy now, pay later” services amidst challenges in the cost of living. This has prompted campaigners to renew calls for comprehensive regulation of this multi-billion-pound industry.
“Buy now, pay later” (BNPL) allows online shoppers to stagger their payments, experiencing rapid growth in recent years. Despite its popularity, BNPL has faced accusations of contributing to debt for individuals. Typically, expenses are divided into weekly, bi-weekly, or monthly payments, with lenders generating income through commissions from retailers.
While lacking formal regulatory authority over the BNPL sector, the FCA wields intervention powers and has taken steps to prompt adjustments in contract terms deemed “potentially unfair and unclear.”
The FCA disclosed that PayPal and QVC voluntarily improved the clarity of their “continuous payment authority” terms. PayPal also made its terms regarding the process 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 payments from their debit or credit card.
Despite the FCA’s limited regulatory oversight over BNPL products, a spokesperson emphasized its commitment to safeguarding consumers in financial services whenever possible.
The financial watchdog reported a “significant increase” in BNPL utilization, with 27% of UK adults, approximately 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 research also indicated that individuals frequently utilizing BNPL services were “more likely to be experiencing financial difficulties.”
A spokesperson from PayPal noted that the company took voluntary actions in July 2023 to amend certain legal terms and conditions associated with its BNPL service, “PayPal Pay in 3.” They highlighted close collaboration with the regulator on these changes and confirmed reaching an agreement. This agreement aims to provide enhanced clarity for customers who had previously used Pay in 3 loans under the prior terms.
The spokesperson reiterated PayPal’s dedication to treating customers fairly and fulfilling its regulatory obligations, emphasizing the company’s commitment to complete compliance with all relevant laws and regulations.