‘Buy now, pay later’ firms warned over misleading adverts using social media stars

The regulator said some adverts were still promoting the benefits of buy now, pay later without also warning it risked causing debt, poor credit ratings and charges for late payments.

All adverts in the sector must be approved by a firm authorised by the FCA, which has changed or banned more than 4,200 promotions for breaking its rules on advertising so far this year.

The charity Citizens Advice has previously warned buy now, pay later loans could be a “slippery slope into debt” and one in 10 users had been referred to debt collectors.

Sheldon Mills of the FCA 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.”

A spokesman for Klarna, which is authorised by the FCA, said it had “actively and substantially” improved its advertising policies since the ASA rulings in 2020. It has also set up an “influencer council” in a bid to ensure its brand ambassadors abide by advertising rules.  

The firm added: “Our advertising promotes responsible spending and our financial promotions already comply with the FCA rules.

“We share the concerns outlined in the FCA’s letter because not all providers operate to the same high standards as Klarna. We continue to call for proportionate regulation of the sector so consumers are protected regardless of the provider they choose.”

Earlier this year the FCA intervened at Klarna and three other firms, Clearpay, Laybuy and Openpay, to improve their terms and conditions and make them “fairer and easier for consumers to understand”. The regulator said all four firms had cooperated and addressed its concerns.