FCA closes the financial promotion loophole and buy-now-pay-later firms

The city watchdog sent a warning to now-paylater chiefs, warning them that they could face two years imprisonment if the rules are not followed. They use a “loophole”, which allows them to clamp down even on indirect products. Organize them city ​​in the morning It can reveal.

He sees in a message city ​​in the morningThe Financial Conduct Authority, although it has not yet set any rules to regulate deferred pay products, has warned some BNPL chiefs, retailers, and others that any communication or explanation’ about BNPL products constitutes financial promotions’, and is therefore within its purview. .

Campaign Tracking Warning shot from regulatorClearpay, Laybuy, Klarna and Clearpay, BNPL company, said in August that promotions should be clear, fair, honest, and not misleading. The rules of the regulator state that any invitation or incentive to invest can be considered financial promotion.

Industry insiders reacted strongly to the move, claiming that the FCA expanded the definition of financial promo and stifled revenue from BNPL companies. This was after dozens of retailers received similar letters and canceled shoppers’ access payment products.

A senior source at one of the BNPL firms said this. city ​​in the morning They are now facing a “horrific” period up to Black Friday and Christmas.

The Financial Conduct Authority (FCA), has identified a loophole in its attempt to regulate the sector. And this loophole is an incredibly broad definition of what a financial upgrade is.”

“It appears that Financial Conduct Authority (FCA), has argued that any information explaining how the product works constitutes financial promotion. This means that it needs to be regulated and checked out.

The regulator gave companies a narrow turnaround, stating that they had not been given enough time or the opportunity to hire “approved” people or to make deals with regulated companies outside of their company to sign off product communications.

A spokesperson for the regulator told City AM yesterday: “If content on a webpage causes consumer engagement, it is likely to be financial promotion and will have to be issued or approved by an authorized company.

“It is essential that all financial promotions are clear, fair and not misleading.”

The enforcement comes after the Financial Conduct Authority (FCA) and the Treasury Department came under fire from some quarters for the speed of their move on the BNPL and the fact that the sector remains unregulated despite warnings of an “urgent” need for oversight over 18 months ago.

Debt activists raised alarm about the unregulated nature and products of consumer goods as they rely on credit to meet rising living costs.

In June, Treasury announced a framework that would regulate BNPL products. It includes improved affordability screening and inclusion into the Financial Ombudsman Service. However the Financial Conduct Authority is not expected to fully regulate this venue until 2024.