FCA requires review on promotion of buy-now-pay-later products

On 19 August, the UK's financial services regulator the Financial Conduct Authority (FCA) issued a 'Dear CEO' letter to both authorised and non-authorised firms. It requires them to review their financial promotions for 'unregulated' buy-now-pay-later (BNPL) products – these currently fall within an exemption from being classed as regulated consumer credit and which have proven popular in recent years.  

Notably the FCA also published a letter to the British Retail Consortium asking it to share its content with members. 

The Dear CEO letter is aimed at anyone entering BNPL agreements with consumers, retailers that introduce customers to BNPL providers to be able to make purchases, and authorised entities which approve financial promotions of BNPL. This includes social media influencers. 

A key message is that those who approve and issue financial promotions of 'unregulated' BNPL must still ensure that the promotion complies with the Consumer Credit rules. 

The FCA has identified promotions in websites and social media that may breach those requirements as they do not flag the risks associated with the products. Retailers need to make sure that their promotions are appropriately approved by an FCA authorised firm.

The FCA has also flagged that its newly introduced consumer duty could apply to those involved in producing, approving or the distribution of retail customer communications. This all takes place at a time when the UK Government is planning to bring unregulated BNPL products within the UK regulatory perimeter.

Those involved in the promotion of BNPL, particularly unregulated products and especially retailers who use diverse channels and influencers, should review their arrangements to ensure they are operating within the rules.