Buy now, pay later - CAP publishes new guidance for online retail checkouts

09 December 2020

The Committee of Advertising Practice (CAP) has published new guidance on the advertising of delayed payment services (or "buy now pay later”/BNPL) services.

BNPL has become a common feature of online retailers’ checkouts, with some retailers offering consumers multiple BNPL options. The new guidance seeks to ensure these services are not presented to consumers in a misleading manner. The guidance covers all marketing communications promoting BNPL services, including "general advertising" of the services (e.g. TV spots, print ads, online display) and the act of offering of the services at online retailers’ checkouts. This means it is relevant not only to the delayed payment service providers themselves but also to all online retailers incorporating BNPL into their checkouts.

The guidance is specifically aimed at services not already regulated by the FCA, which:

  • charge no interest (although may incur late payment charges);
  • allow consumers to defer payments by either (i) offering longer payment terms (i.e. charging the full amount after a fixed period, e.g. 30 days), or (ii) charging partial amounts, e.g. weekly or monthly instalments, without an upfront payment; and
  • are integrated into online shopping checkout processes.

The overarching focus of the guidance is ensuring that communications are not misleading within the meaning of rule 3 of the CAP and BCAP Codes, which respectively govern non-broadcast and broadcast media. In short, advertisers must:

  • make clear that use of the BNPL service creates a debt;
  • not imply that use of BNPL services is suitable for everyone or is "risk free" or "low risk". While many BNPL services rely on "soft" credit checks which typically do not factor into standard credit scores, credit scoring is complex and access to further credit may, for example, still be affected. As such advertisers should take extra care to ensure they can substantiate any claim that a BNPL service will not affect a consumer’s credit score;
  • ensure services are not inappropriately described as “free” or are appropriately qualified (for example, if late fees may become payable);
  • ensure that all payment options are clearly displayed at checkout, and that standard (non-credit-based) payment options are also available; and
  • display key conditions of the BNPL service (such as payment schedules and penalties) within the checkout process, and not simply via a link to terms and conditions.

CAP expects advertisers to bring their advertising into compliance swiftly and in any event by 2 March 2021. Until then, CAP will address any issues of non-compliance on an informal basis.

The new guidance is relevant to both 'buy now pay later' service providers themselves and to online retailers incorporating 'buy now pay later' services into their checkouts. The focus is on ensuring the services are not presented to consumers in a misleading manner.