“Buy now, pay later” companies, including Swedish fintech Klarna and Australian-owned ClearPay, are facing a crackdown on their advertising, amid growing concerns that consumers are being hoodwinked into signing up to such schemes without advice.
The Committee of Advertising Practice (CAP) – which sits within the Advertising Standards Authority – says that although the schemes are not new, their accessibility and popularity with younger consumers means potential customers may be less aware that deferring payment is a type of debt.
As such, CAP says, consumers may be less likely to fully appreciate possibilities of late payment fees and, potentially, referral to debt collection agencies and any subsequent impact on credit scores.
The guidance is intended to prevent ads for these services from misleading consumers. Most notably, it advises advertisers on how to ensure consumers understand that the service being offered comprises a form of credit.
CAP warned it expects all advertisers to “act swiftly” to amend their advertising where necessary. However, it does recognise thus might take longer for some media channels, especially those that integrate with companies’ internal payment systems, and has given advertisers until March 2 2021 to adjust to the new guidance by resolving matters informally.
Anthony Morrow, co-founder of financial advice firm OpenMoney, said: “[These] schemes have become increasingly popular through manipulative advertising and irresponsible encouragement by social media influencers, playing on our fear of missing out to convince people to take on debt in order to live a lifestyle they can’t afford.
“The new guidance is very welcome, especially the importance of ensuring customers understand that it is a type of debt. We hope that the Government will now address the lack of regulation around these schemes and look at strengthening consumer credit law to help better protect consumers.”
Klarna’s latest campaign stars TV personality and celebrity designer Tan France. Created by agency Motel, the ad urges consumers to “find the fashion you love” and “get the Klarna app”.
However, there is no mention that consumers will be taking on debt other than virtually illegible text which appears at the foot of the screen for less than half the duration of the 30-second ad and states: “18+ UK residents only. T&Cs apply. Credit provided by Klarna Bank”.
The firm already offers both buy-now-pay-later schemes and online checkout services for, among others, H&M, Halfords, River Island, Ann Summers, Asos, and Clarks,