It's a rough week for ASX buy now, pay later (BNPL) shares amid news from the United Kingdom.
The nation's financial watchdog asked Openpay Group Ltd (ASX: OPY) and Laybuy Holdings Ltd (ASX: LBY) to change "potentially unfair and unclear" terms in their contracts on Monday.
Let's take a closer look at what might have weighed on some ASX BNPL shares this week.
Has this UK watchdog impacted ASX BNPL shares this week?
4 BNPL companies operating in the United Kingdom – 2 of which are listed on the ASX – were addressed by the nation's Financial Conduct Authority (FCA) over concerns regarding their terms and conditions.
Laybuy, Openpay, and Clearpay all voluntarily changed their contracts and refunded customers impacted by the 'unfair' terms this week.
Non-listed BNPL company Klarna was also caught up in the regulator's sweep. Though, as it doesn't charge late fees, it had no need to issue refunds.
FCA executive director of consumers and competition, Sheldon Mills said the body can't regulate BNPL firms yet, but it can hold them to other standards.
"The 4 BNPL firms we have worked with have all voluntarily agreed to change their approach," Mills said. "We welcome this and hope that the rest of the industry will now follow."
One issue flagged by the watchdog was how the BNPL companies dealt with returned purchases.
It stated some customers had been forced to continue payments or charged late fees if a retailer took their time when reporting a return to a BNPL provider.
Additionally, the FCA found that the BNPL providers' terms and conditions allowed too much leeway when cancelling or suspending accounts and didn't let customers deduct money owed by the provider from their debts.
Finally, it was worried the contracts didn't clearly state how customers can cancel a provider's ability to take money from their debit or credit cards.
According to reporting by the Guardian, an Openpay spokesperson said the company welcomed the FCA's insights and would welcome "fair and appropriate regulation" in the United Kingdom.
The publication also stated Laybuy has flagged its preference for direct regulation from the FCA.
Alex Marsh, head of Klarna UK, commented on the regulator's action, saying the company welcomed the FCA's oversight and implemented the proposed changes to their terms and conditions in September 2021.
"We continuously review our Ts&Cs including working with Fairer Finance, to ensure that we are communicating in the most clear, fair, and transparent way," said Marsh.
"We have never received a customer complaint specifically related to these Ts&Cs but are always open to ways in which they can be improved."
What else might have weighed on the BNPL sector?
Other news that could have dragged on ASX BNPL shares this week include interest rate fears and the technology sector's performance.
As The Motley Fool Australia chief investment officer Scott Phillips told Nine's Late News on Sunday, markets have been concerned about rising inflation, which could drive up interest rates.
As previously reported by The Motley Fool Australia's Zach Bristow, rising interest rates are generally bad news for the tech sector, within which BNPL shares are often grouped.
Additionally, the tech-heavy Nasdaq Index has slumped 3% over the last 5 sessions.
The S&P/ASX 200 Info Tech Index (ASX: XIJ) has also slumped 1% this week while the S&P/ASX All Technology Index (ASX: XTX) has fallen 1.4%.
For comparison's sake, the S&P/ASX 200 Index (ASX: XJO) has gained 0.3% in the same time frame.
How have BNPL stocks performed this week?
While the news from the northern hemisphere may not have impacted the share price of both Openpay and Laybuy, they've both ended this week in the red.
The share price of Openpay has tumbled 4% since Monday, while that of Laybuy has plummeted 25%.
And while neither Zip Co Ltd (ASX: Z1P) nor Sezzle Inc (ASX: SZL) were involved in the FCA's findings, their share prices have fallen 8% and 11% respectively this week.
The Block Inc CDI (ASX: SQ2) share price has suffered the least. The owner of Afterpay has seen its ASX-listed stock slide just 1%.
Looking to the United States' markets, the Affirm Holdings Inc (NASDAQ: AFRM) share price has slipped 29% over the last 5 sessions.
Meanwhile, that of Paypal Holdings Inc (NASDAQ: PYPL) has tumbled 12%.
