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LONDON, Feb 14 (Reuters) - Britain's financial watchdog said on Monday it had told four 'buy now pay later' firms (BNPL) to change their contracts after identifying "potential harms" to consumers.
A form of unsecured credit, BNPL products typically offer on the spot interest-free short-term loans that spread payments for retail goods like clothing.
The market more than trebled in size during 2020, when COVID-19 lockdowns saw more people struggling to make ends meet.
"The four firms involved, Clearpay, Klarna, Laybuy and Openpay, have fully cooperated with our work. We welcome their cooperation and their actions to address our concerns," the Financial Conduct Authority said in a statement.
The changes make the contracts fairer, easier for consumers to understand and better reflect how they use them in practice, the FCA said.
Klarna said it had already implemented the FCA's proposed changes.
"We have never received a customer complaint specifically related to our terms and conditions but are always open to ways in which they can be improved," said Alex Marsh, Head of Klarna UK.
The watchdog said that all firms in the sector should comply with all requirements of consumer protection laws that apply to their business.
One of the terms that involved late payment fees has resulted in Clearpay, Laybuy and Openpay agreeing to voluntarily refund customers who have been charged such fees in specific circumstances, the FCA said
Clearpay, Laybuy and Openpay did not immediately respond to requests for comment.
A review by former FCA acting CEO Christopher Woolard in February 2021 said BNPL can pose potential consumer harms https://www.fca.org.uk/publication/corporate/woolard-review-report.pdf that need to be addressed as soon as possible.
Britain's finance ministry promised to bring forward legislation to regulate BNPL when parliamentary time allowed.
