The ASA’s sister organisation, the Committee of Advertising Practice (CAP), is responsible for writing the Advertising Codes, which are the rules advertisers are obliged to stick to.

CAP has published guidance for the promotion of ‘delayed payment’ services, such as Klarna and ClearPay which have become increasingly available to customers at online checkouts. The aim of the guidance is to ensure BNPL firms don’t mislead potential consumers.

CAP says that although BNPL schemes are not a new form of payment or credit, their easy accessibility and popularity with younger consumers means potential customers may be less aware that deferring payment using these services is a type of debt.

As such, they 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 CAP guidelines say that advertisers should make it clear that BNPL schemes are a form of credit and not state or imply that they are not.

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The guidelines also say that BNPL providers must be careful if they claim use of such services won’t have an impact on consumers’ credit scores. It pointed out that although some BNPL firms don’t report late or missed payments to credit reference agencies, they often pass on unpaid debts to debt collectors, a process that will have consequences for borrowers.

The guidelines also advise marketers to be careful if they say credit is ‘free’ when it may have associated fees under some circumstances, such as late payments.

The CAP has given advertisers until 2 March 2021 to amend their advertising where necessary.

Anthony Morrow, co-founder of OpenMoney, said: “Buy Now Pay Later (BNPL) schemes, like Klarna and ClearPay, make it very easy to take on debt without fully thinking about how to pay it back or the implications if you don’t. They 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 on how BNPL schemes can advertise 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.”