Britons are turning to unregulated ‘buy-now-pay-later’ credit in ever increasing numbers to pay their bills, the Financial Conduct Authority said on Tuesday, in the latest sign of how the country’s cost of living crisis continues to bite.
Companies that offer buy-now-pay-later (BNPL) unsecured loans are not regulated by the FCA, though it has used Britain’s consumer rights law to make contracts fairer.
The government set out draft legislation in February to regulate the business.
The watchdog said its latest Financial Lives survey showed that 27 per cent of UK adults or about 14 million people, have used BNPL at least once in the six months to January 2023, up from 17 per cent in the 12 months to May 2022.
Since then, Bank of England interest rates have risen further, making credit more expensive.
BNPL is offered over a short period to shoppers who buy to clothes or other retail goods. Frequent users were more likely to be in financial difficulty and to have missed a payment of a bill or credit commitment, the FCA said.
The regulator said it was concerned that PayPal and QVC customers were at risk of harm because of how some of the contract terms were drafted.
“As a result of the FCA’s continued focus in this area, both firms have voluntarily made their continuous payment authority terms easier to understand – and PayPal has made terms relating to what happens when a consumer cancels the purchase funded by the loan clearer and fairer,” the FCA said in a statement.
In 2022, the FCA told Clearpay, Klarna, Laybuy and Openpay to change their contracts.
“When used appropriately, the product provides valuable benefits, but we want to ensure that consumers, particularly those in vulnerable circumstances, have adequate protections and are given sufficient information,” said Sheldon Mills, FCA executive director for consumers and competition.