Buy now, pay later firms to refund customers’ late payment fees
SOME buy now, pay later customers could get refunds after the watchdog identified potentially unclear terms and conditions.
Three firms - Clearpay, Laybuy, and Openpay - have agreed to voluntarily refund customers who were charged late payment fees in specific circumstances.
The Financial Conduct Authority (FCA) has asked buy now, pay later firms to make terms and conditions clearer.
The FCA said it was concerned there was a potential risk of harm to consumers as a result of the way some firms' terms were drafted.
The four firms involved - Clearpay, Klarna, Laybuy and Openpay - have fully co-operated with the FCA's work, the regulator said.
The firms will now make terms on issues such as contract cancellations and payments easier to understand.
In addition, one of the terms that involved late payment fees has resulted in Clearpay, Laybuy, and Openpay agreeing to voluntarily refund customers who have been charged late payment fees in specific circumstances, the FCA said.
Sheldon Mills, executive director of consumers and competition at the FCA, said: "Buy now, pay later has grown exponentially.
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"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, and have acted proactively to ensure that the BNPL industry adopts high standards in their terms and conditions.
"The four BNPL firms we have worked with have all voluntarily agreed to change their approach. We welcome this and hope that the rest of the industry will now follow."
Clearpay, Klarna, Laybuy and Openpay have all agreed to change their terms and conditions going forward.
Three of the firms - Clearpay, Laybuy, and Openpay - have agreed to refund customers who may have been affected by one of the terms before they were updated.
Customers potentially affected are those who cancelled their entire order but may have been charged a late fee after the the loan agreement should have been cancelled.
Klarna does not charge late payment fees , and so no refund is due to customers.
Clearpay is working on identifying those affected where it can, and will contact them about an automatic refund.
Anyone who thinks they are affected can apply for a refund and the BNPL provider has a specific to fill in.
You'll need to provide some basic information like your name, date of birth, contact details and the order number.
Customers could have been charged a £6 late fee if they returned all items but had to wait longer for a refund from the shop they bought from.
A Clearpay spokesperson said there is a "very small group of customers who may have incorrectly been charged a late fee because we were not notified of them returning a purchase within a certain time frame."
The company has introduced a new feature called "Pause and Notify" where you can push back payment by up to two weeks for free while you wait for the retailer to issue a refund.
We've asked Laybuy, and Openpay who will get refunds and if customers will have to make a claim or will get the cash automatically, and will update when we hear back.
Laybuy which has around 750,000 customers in the UK, said it has now simplified its contract terms, including what happens in the event of an order cancellation or return
Anyone who thinks they may have been affected should contact the BNPL firm directly in the first instance.
STRICTER RULES
Customers of other firms who think they may have been affected too should contact the firm directly.
While the three firms have agreed to pay refunds, other firms have not and they don't have to give any money back even if the same circumstances apply.
BNPL is not regulated in the same way as other borrowing and other firms do not have to offer a refund.
You can't make a complaint to the Financial Ombudsman if something goes wrong with BNPL.
It comes as BNPL lenders face stricter rules that will also see the borrowing appear on credit reports for the first time.
BNPL use nearly quadrupled in 2020 hitting £2.7billion, but the firms are not currently regulated by the FCA in the same way as other borrowing.
After a report last year, the firms will be regulated to stop millions of shoppers plunging into debt.
But shoppers face a longer wait for it to become law that means they have the same protection as credit cards and loans.
Matthew Upton, director of policy at Citizens Advice, said: “Shoppers have been left unprotected and ill-informed during the meteoric rise of the Buy Now Pay Later sector.
“Our real fear is that many people don’t understand what they are signing up to, or the consequences if things go wrong.
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“We welcome this intervention by the FCA, and hope this sets the tone for its wider overhaul of the sector.
"Protecting consumers must underpin the long-awaited regulation of Buy Now Pay Later.”
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