FCA focuses on PayPal, QVC in response to UK BNPL surge.
2 min read
The payment firm and TV shopping channel updated terms post-regulator involvement.
The city’s financial regulator acted upon discovering risks to customers using two major “buy now, pay later” services due to unclear and potentially unfair terms. Responding to the Financial Conduct Authority’s (FCA) expressed “concerns” about customer impact, both PayPal and QVC revised their contract terms.
These events unfolded concurrently with recent data indicating a notable rise in the adoption of “buy now, pay later” (BNPL) services among people in the UK, grappling with the challenges of the rising cost of living. Consequently, advocates are renewing their calls for comprehensive regulation of this multi-billion-pound industry.
The BNPL model, allowing online shoppers to stagger their payments, has seen rapid growth in recent years but has also faced criticism for potentially pushing individuals into debt. Typically, expenses are divided into weekly, bi-weekly, or monthly payments, with lenders earning income through commissions from retailers.
While the Financial Conduct Authority (FCA) currently lacks formal regulatory authority over the BNPL sector, it possesses intervention powers and has taken steps to influence adjustments in contract terms considered “potentially unfair and unclear.”
The FCA disclosed that both PayPal and QVC voluntarily improved the clarity of their “continuous payment authority” terms. Additionally, PayPal made its terms regarding the course of action when a consumer cancels a purchase funded by the loan more transparent and equitable.
Continuous payment authority involves individuals granting a company permission to initiate one or more payments from their debit or credit card.
Despite the FCA’s limited regulatory oversight over BNPL products, a spokesperson emphasized the agency’s commitment to protecting consumers using financial services wherever possible.
The FCA 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 the current year—an increase from the 17% reported in the previous 12 months as of May 2022.
The study also highlighted that frequent users of BNPL services were “more likely to be facing financial difficulties.”
A spokesperson from PayPal noted that in July 2023, the company voluntarily modified certain legal terms and conditions associated with its BNPL service, “PayPal Pay in 3,” in close collaboration with the regulator. An agreement was reached to provide greater clarity to customers who had previously availed themselves of Pay in 3 loans under the previous terms.
The spokesperson reiterated PayPal’s commitment to treating customers fairly and adhering to regulatory responsibilities, emphasizing the company’s dedication to full compliance with all relevant laws and regulations.
