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The UK Financial Conduct Authority (FCA) over recent months has requested that numerous buy now, pay later (BNPL) lenders and e-money firms amend marketing materials as part of its job to protect against misleading promotions. The regulator has also warned consumers against unregulated firms and scammers.
The FCA published new data detailing its interventions in protecting consumers from misleading financial promotions during the third quarter of the year.
Between July 1 and September 30, the FCA reviewed 340 promotions in total. It reached out to 37 authorised firms, which resulted in more than 4,100 amendments or withdrawals of promotions.
Although the vast majority of these ads (3,878) were related to credit brokerage promotions, the regulator has also stepped in regarding BNPL and e-money firms, as well as scams taking advantage of struggling consumers.
BNPL and e-money firms
In August, the FCA released a Dear CEO letter, underscoring that financial promotions of BNPL agreements, regardless of whether they are exempt from existing lending rules or not, must comply with specific regulatory requirements.
The letter was sent to 27,000 firms, the FCA said, while a similar letter was delivered to the British Retail Consortium (BRC) with a view to enhancing the reach of the FCA’s message to unregulated merchants and retailers.
As an example of issues identified during Q3, the FCA said it reached out to a BNPL provider that advertised its services in a way that “lacked balance as they emphasised the potential benefits without giving fair and prominent indication of any relevant risks”.
According to the regulator: “The firm’s website was also misleading regarding fees and their representative example ‘lacked prominence’.”
Following the FCA’s intervention, the firm amended and withdrew 66 promotions on its website, Facebook and YouTube channels.
The regulator warned that it will be undertaking proactive monitoring in the final quarter of the year and may use its criminal and regulatory enforcement powers against non-compliant firms.
The FCA also reached out to an e-money firm that promoted its services as being similar to a bank, but did not adequately tell its customers about the differences in protections between e-money accounts and bank accounts.
The firm was also accused of misleading consumers with an “incomparable example” regarding their exchange rate offering. The company changed 16 promotions after the regulatory outreach, according to the FCA.
Warning against scams amid the rising cost of living
The FCA has also pointed out that over the last quarter, it had seen a number of cases involving unauthorised firms and individuals seeking to take advantage of the rising cost of living.
“As consumers become financially squeezed, they are likely to be targeted by fraudsters and scams and also more likely to engage with high-risk and unregulated products such as crypto-assets,” the FCA warned.
During the three months, the FCA received 6,243 reports about potential unauthorised businesses. It issued 303 alerts, more than 20 percent of which concerned clone scams, which mimic the characteristics of real FCA-authorised companies but are set up by fraudsters. The agency said it took action to take down these websites.
In addition, the FCA noted that Consumer Duty, a new principle that requires firms to act and deliver good outcomes for retail customers, is expected to raise industry standards by ensuring that consumers’ needs, characteristics and objectives are considered when firms set up their products and services.
The Consumer Duty principle was published at the end of July and will be implemented in five phases within the next two years.
