Buy now pay later firms warned over misleading adverts

BUY now, pay later firms have been warned over misleading adverts in a bid to protect shoppers from taking on too much debt.

The UK's financial watchdog has told companies adverts need to warn customers of the risks of borrowing more than they can afford to repay.

Buy now, pay later (BNPL) is a type of borrowing which lets you make a purchase, but delay paying for it.

Shoppers are able to spread the cost of their hauls out over monthly instalments - and it’s popular because it’s interest-free.

Companies offering this service include Klarna, Clearpay and Laybuy.

But companies have come under fire from experts who say customers are falling too easily into debt.

An estimated eight million adults owed money on BNPL purchases last year.

The average debt per person stood at £538 per person, with £4billion owed in total, figures from Credit Karma showed.

Concerns have been raised that shoppers could turn to BNPL amid a cost of living crisis and take on more debt than they can afford to pay back.

Now, the Financial Conduct Authority has raised concerns over BNPL adverts on websites and social media, including influencers promoting products.

It said ads like these could be breaching rules, and warned firms they could be committing a criminal offence.

The watchdog said some were failing to warn consumers of the consequences of missed payments, the impact on people’s credit scores, and did not make clear when charges become payable.

FCA consumers and competition executive director Sheldon Mills said: "As we face a cost-of-living crisis, consumers are having to make difficult decisions about their finances and how they pay for goods and services.

“Firms need to ensure consumers, particularly those in vulnerable circumstances, are equipped with the right information at the right time, so they can make effective, timely and properly informed decisions.